Interactive Single Rulebook

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Interactive Single Rulebook

Path Capital Requirements Regulation > PART SEVEN > Article 429 (Copy link to article)
Title Article 429
Description Calculation of the leverage ratio
Main content

5. Institutions shall determine the exposure value of assets, excluding contracts listed in Annex II and credit derivatives, in accordance with the following principles:

6. Institutions may deduct from the exposure measure set out in paragraph 4 of this Article the amounts deducted from Common equity Tier 1 capital in accordance with Article 36(1)(d).

7. Competent authorities may permit an institution not to include in the exposure measure exposures that can benefit from the treatment laid down in Article 113(6). Competent authorities may grant that permission only where all the conditions set out in points (a) to (e) of Article 113(6) are met and where they have given the approval laid down in Article 113(6).

8. By way of derogation from point (d) of paragraph 5, institutions may determine the exposure value of cash receivables and cash payables of repurchase transactions, securities or commodities lending or borrowing transactions, long settlement transactions and margin lending transactions with the same counterparty on a net basis only if all the following conditions are met:

(a) the transactions have the same explicit final settlement date;

(b) the right to set off the amount owed to the counterparty with the amount owed by the counterparty is legally enforceable in all the following situations:

(i) in the normal course of business;

(ii) in the event of default, insolvency and bankruptcy;

(c) the counterparties intend to settle net, settle simultaneously, or the transactions are subject to a settlement mechanism that results in the functional equivalent of net settlement.

For the purposes of point (c) of the first subparagraph, a settlement mechanism results in the functional equivalent of net settlement if, on the settlement date, the net result of the cash flows of the transactions under that mechanism is equal to the single net amount under net settlement.

11. An institution that is a clearing member of a QCCP may exclude from the calculation of the exposure measure trade exposures of the following items, provided that those trade exposures are cleared with that QCCP and meet, at the same time, the conditions laid down in Article 306(1)(c):

(a) contracts listed in Annex II;

(b) credit derivatives;

(c) repurchase transactions;

(d) securities or commodities lending or borrowing transactions;

(e) long settlement transactions;

(f) margin lending transactions

12. Where an institution that is a clearing member of a QCCP guarantees to the QCCP the performance of a client that enters directly into derivative transactions with the QCCP, it shall include in the exposure measure the exposure resulting from the guarantee as a derivative exposure to the client in accordance with Article 429a.

14. Competent authorities may permit an institution to exclude from the exposure measure exposures that meet all of the following conditions:

(a) they are exposures to a public sector entity;

(b) they are treated in accordance with Article 116(4);

(c) they arise from deposits that the institution is legally obliged to transfer to the public sector entity referred to in point (a) for the purposes of funding general interest investments.’

(2) The following Articles 429a and 429b are inserted:

Topics Liquidity risk ; Leverage ratio