Version in force , Modified +1,038 −2,241§
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 no longer refers to the calculation method under Part Three, Title II, Chapter 3 or the associated permission from competent authorities for using own estimates of the effects of financial collateral, and instead requires institutions, other than those using the Financial Collateral Simple Method, to use the Financial Collateral Comprehensive Method regardless of the method used for own funds requirements, with a separate derogation allowing use of certain Chapter 4 and Chapter 6 methods for securities financing transactions.
Paragraph 3's stress-testing and concentration-risk strategy requirements are no longer limited to institutions using the Financial Collateral Comprehensive Method or the paragraph 2 method, but apply to institutions generally, and the former point (b) on policies for a lower realisable collateral value found in a stress test has been removed, leaving only the maturity-mismatch and concentration-risk policy points.
A new paragraph 4 has been added addressing the treatment, in the manner set out in Article 403, of the reduced portion of an exposure to a client as having been incurred for the protection provider rather than the client where a credit risk mitigation technique under Article 399(1) is used.
Cited: Art. 401, v1 (external, EUR-Lex) · Art. 401, v2 (external, EUR-Lex)
v1 is the previous version, v2 this one.
Text from EUR-Lex, before and after
texts differ too much for an inline diff; shown separately
Previous version, in force 28 December 2020 02013R0575-20201228
Article 401 Calculating the effect of the use of credit risk mitigation techniques 1. For calculating the value of exposures for the purposes of Article 395(1) an institution may use the fully adjusted exposure value as calculated under Part Three, Title II, Chapter 4 taking into account the credit risk mitigation, volatility adjustments, and any maturity mismatch (E*). 2. An institution permitted to use own estimates of LGDs and conversion factors for an exposure class under Part Three, Title II, Chapter 3 may, subject to a permission by the competent authorities recognise the effects of financial collateral in calculating the value of exposures for the purposes of Article 395(1). Competent authorities shall grant the permission referred to in preceding subparagraph only if the institution can estimate the effects of financial collateral on their exposures separately from other LGD-relevant aspects. The estimates produced by the institution shall be sufficiently suitable for reducing the exposure value for the purposes of compliance with the provisions of Article 395. Where an institution is permitted to use its own estimates of the effects of financial collateral, it shall do so on a basis consistent with the approach adopted in the calculation of the own funds requirements in accordance with this Regulation. Institutions permitted to use own estimates of LGDs and conversion factors for an exposure class under Part Three, Title II, Chapter 3, which do not calculate the value of their exposures using the method referred to in the first subparagraph of this paragraph, may use the Financial Collateral Comprehensive Method or the approach set out in Article 403(1)(b) for calculating the value of exposures. 3. An institution that makes use of the Financial Collateral Comprehensive Method or is permitted to use the method described in paragraph 2 of this Article in calculating the value of exposures for the purposes of Article 395(1) shall conduct periodic stress tests of their credit-risk concentrations, including in relation to the realisable value of any collateral taken. These periodic stress tests referred to in the first subparagraph shall address risks arising from potential changes in market conditions that could adversely impact the institutions' adequacy of own funds and risks arising from the realisation of collateral in stressed situations. The stress tests carried out shall be adequate and appropriate for the assessment of such risks. In the event that the periodic stress test indicates a lower realisable value of collateral taken than would be permitted to be taken into account while making use of the Financial Collateral Comprehensive Method or the method described in paragraph 2 as appropriate, the value of collateral permitted to be recognised in calculating the value of exposures for the purposes of Article 395(1) shall be reduced accordingly. Institutions referred to in the first subparagraph shall include the following in their strategies to address concentration risk: (a) policies and procedures to address risks arising from maturity mismatches between exposures and any credit protection on those exposures; (b) policies and procedures in the event that a stress test indicates a lower realisable value of collateral than taken into account while making use of the Financial Collateral Comprehensive Method or the method described in paragraph 2; (c) policies and procedures relating to concentration risk arising from the application of credit risk mitigation techniques, and in particular large indirect credit exposures, for example to a single issuer of securities taken as collateral.
this version, in force 28 June 2021 02013R0575-20210629
Article 401 Calculating the effect of the use of credit risk mitigation techniques 1. For calculating the value of exposures for the purposes of Article 395(1), an institution may use the fully adjusted exposure value (E*) as calculated under Chapter 4 of Title II of Part Three, taking into account the credit risk mitigation, volatility adjustments and any maturity mismatch referred to in that Chapter. 2. With the exception of institutions using the Financial Collateral Simple Method, for the purposes of the first paragraph, institutions shall use the Financial Collateral Comprehensive Method, regardless of the method used for calculating the own funds requirements for credit risk. By way of derogation from paragraph 1, institutions with permission to use the methods referred to in Section 4 of Chapter 4 of Title II of Part Three and Section 6 of Chapter 6 of Title II of Part Three, may use those methods for calculating the exposure value of securities financing transactions. 3. In calculating the value of exposures for the purposes of Article 395(1), institutions shall conduct periodic stress tests of their credit-risk concentrations, including in relation to the realisable value of any collateral taken. The periodic stress tests referred to in the first subparagraph shall address risks arising from potential changes in market conditions that could adversely impact the institutions' adequacy of own funds and risks arising from the realisation of collateral in stressed situations. The stress tests carried out shall be adequate and appropriate for the assessment of those risks. Institutions shall include the following in their strategies to address concentration risk: (a) policies and procedures to address risks arising from maturity mismatches between exposures and any credit protection on those exposures; (b) policies and procedures relating to concentration risk arising from the application of credit risk mitigation techniques, in particular from large indirect credit exposures, for example, exposures to a single issuer of securities taken as collateral. 4. Where an institution reduces an exposure to a client using an eligible credit risk mitigation technique in accordance with Article 399(1), the institution, in the manner set out in Article 403, shall treat the part of the exposure by which the exposure to the client has been reduced as having been incurred for the protection provider rather than for the client.