Version in force , Modified +911 −865§
Amended by Regulation (EU) 2019/2033 32019R2033 on EUR-Lex (external, EUR-Lex) · Regulation (EU) 2019/876 32019R0876 on EUR-Lex (external, EUR-Lex) · Regulation (EU) 2021/558 32021R0558 on EUR-Lex (external, EUR-Lex) · Regulation (EU) 2020/873 32020R0873 on EUR-Lex (external, EUR-Lex)
Explanation, written by a model and checked against the cited text
Paragraph 1 now describes the calculation obligation as applying to an institution that is a client rather than framing it as something the institution does where it is a client, and it adds a cross-reference to Section 4 of Chapter 4 of the Title alongside the existing references to Sections 1 to 8 and Title VI.
Point (c) of paragraph 2 no longer requires an independent written legal opinion concluding the client would bear no losses on insolvency, and instead requires a sufficiently thorough, kept-up-to-date legal review substantiating that the arrangements ensuring the transfer condition in point (b) are legal, valid, binding and enforceable, with a new subparagraph allowing account to be taken of clear precedents of transfers and industry intent to continue that practice.
Paragraph 3 is now expressed as a derogation tied specifically to failure to meet point (a) of paragraph 2 because of joint default risk, referencing points (a) to (d) of paragraph 2 and point (a) of Article 306(1), while paragraph 4 now addresses a multi-level client structure and a lower-level client accessing a CCP through a higher-level client, rather than indirect clearing arrangements under Regulation (EU) No 648/2012.
Cited: Art. 305, v1 (external, EUR-Lex) · Art. 305, v2 (external, EUR-Lex)
v1 is the previous version, v2 this one.
Text from EUR-Lex, before and after
Previous version, in force 28 December 2020 02013R0575-20201228 → this version, in force 28 June 2021 02013R0575-20210629
Article 305
Treatment of clients' exposures
1. Where an An institution that is a client, it client shall calculate the own funds requirements for its CCP-related transactions with its clearing member in accordance with Sections 1 to 8 of this Chapter, with Section 4 of Chapter 4 of this Title and with Title VI of Part Three, VI, as applicable.
2. Without prejudice to the approach specified in paragraph 1, where an institution is a client, it may calculate the own funds requirements for its trade exposures for CCP-related transactions with its clearing member in accordance with Article 306 provided that all the following conditions are met:
(a) the positions and assets of that institution related to those transactions are distinguished and segregated, at the level of both the clearing member and the CCP, from the positions and assets of both the clearing member and the other clients of that clearing member and as a result of that distinction and segregation those positions and assets are bankruptcy remote in the event of the default or insolvency of the clearing member or one or more of its other clients;
(b) laws, regulations, rules and contractual arrangements applicable to or binding that institution or the CCP facilitate the transfer of the client's positions relating to those contracts and transactions and of the corresponding collateral to another clearing member within the applicable margin period of risk in the event of default or insolvency of the original clearing member. In such circumstance, the client's positions and the collateral shall be transferred at market value unless the client requests to close out the position at market value;
(c) the institution client has available an independent, written conducted a sufficiently thorough legal review, which it has kept up to date, that substantiates that the arrangements that ensure that the condition set out in point (b) is met are legal, valid, binding and reasoned legal opinion that concludes that, in the event of legal challenge, enforceable under the relevant courts and administrative authorities would find that the client would bear no losses on account of the insolvency of its clearing member or of any of its clearing member's clients under the laws of the relevant jurisdiction of the institution, its clearing member and the CCP, the law governing the transactions and contracts the institution clears through the CCP, the law governing the collateral, and the law governing any contract or agreement necessary to meet the condition in point (b); jurisdictions;
(d) the CCP is a QCCP.
When assessing its compliance with the condition set out in point (b) of the first subparagraph, an institution may take into account any clear precedents of transfers of client positions and of corresponding collateral at a CCP, and any industry intent to continue with that practice.
3. Without prejudice to the conditions specified in By way of derogation from paragraph 2, 2 of this Article, where an institution that is a client fails to meet the condition set out in point (a) of that paragraph because that institution is not protected from losses in the case that the clearing member and another client of the clearing member jointly default, but provided that all the other conditions set out in points (a) to (d) of that paragraph 2 are met, the client institution may calculate the own funds requirements for its trade exposures for CCP-related transactions with its clearing member in accordance with Article 306, subject to replacing the 2 % risk weight set out in paragraph 1(a) point (a) of that Article 306(1) with a 4 % risk weight.
4. Where In the case of a multi-level client structure, an institution that is a lower-level client accesses accessing the services of a CCP through indirect clearing arrangements, in accordance with Article 4(3) of Regulation (EU) No 648/2012, that institution a higher-level client may apply the treatment set out in paragraph 2 or 3 only where the conditions in each paragraph set out therein are met at every level of the chain of intermediaries. that structure.