Article 224

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Capital Requirements Regulation (CRR) > PART THREE > TITLE II > CHAPTER 4 > Section 4 > Sub-Section 1 > Article 224
Title:
Article 224
Description: 
Supervisory volatility adjustment under the Financial Collateral Comprehensive Method
Main content: 

VOLATILITY ADJUSTMENTS

Table 1
Credit quality step with which the credit assessment of the debt security is associated Residual Maturity

Volatility adjustments for debt securities issued by entities described in Article 197(1)(b)

Volatility adjustments for debt securities issued by entities described in Article 197(1) (c) and (d)

Volatility adjustments for securitisation positions and meeting the criteria in Article 197(1) (h)

20-day liquidation period (%) 10-day liquidation period (%) 5-day liquidation period (%) 20-day liquidation period (%) 10-day liquidation period (%) 5-day liquidation period (%) 20-day liquidation period (%) 10-day liquidation period (%) 5-day liquidation period (%)
1 ≤ 1 year 0,707 0,5 0,354 1,414 1 0,707 2,829 2 1,414
> 1 ≤ 5 years 2,828 2 1,414 5,657 4 2,828 11,314 8 5,657
> 5 years 5,657 4 2,828 11,314 8 5,657 22,628 16 11,313
2-3 ≤ 1 year 1,414 1 0,707 2,828 2 1,414 5,657 4 2,828
> 1 ≤ 5 years 4,243 3 2,121 8,485 6 4,243 16,971 12 8,485
> 5 years 8,485 6 4,243 16,971 12 8,485 33,942 24 16,970
4 ≤ 1 year 21,213 15 10,607 N/A N/A N/A N/A N/A N/A
> 1 ≤ 5 years 21,213 15 10,607 N/A N/A N/A N/A N/A N/A
> 5 years 21,213 15 10,607 N/A N/A N/A N/A N/A N/A
Table  2
Credit quality step with which the credit assessment of the debt security is associated Volatility adjustments for debt securities issued by entities described in Article 197(1)(b) Volatility adjustments for debt securities issued by entities described in Article 197(1) (c) and (d) Volatility adjustments for securitisation positions and meeting the criteria in Article 197(1) (h)
20-day liquidation period (%)     10-day liquidation period (%)  5-day liquidation period (%)  20-day liquidation period (%)  10-day liquidation period (%)  5-day liquidation period (%)  20-day liquidation period (%)  10-day liquidation period (%)  5-day liquidation period (%) 
1 0,707 0,5 0,354 1,414 1 0,707 2,829 2 1,414
2-3 1,414 1 0,707 2,828 2 1,414 5,657 4 2,828

 

Table 3
Other collateral or exposure types
20-day liquidation period (%)     10-day liquidation period (%)  5-day liquidation period (%) 
Main Index Equities, Main Index Convertible Bonds 21,213 15 10,607
Other Equities or Convertible Bonds listed on a recognised exchange 35,355 25 17,678
Cash 0 0 0
Gold 21,213 15 10,607

 

Table 4
Volatility adjustment for currency mismatch
20-day liquidation period (%)     10-day liquidation period (%)  5-day liquidation period (%) 
11,314 8 5,657

2. The calculation of volatility adjustments in accordance with paragraph 1 shall be subject to the following conditions:

(a) for secured lending transactions the liquidation period shall be 20 business days;

(b) for repurchase transactions, except insofar as such transactions involve the transfer of commodities or guaranteed rights relating to title to commodities, and securities lending or borrowing transactions the liquidation period shall be 5 business days;

(c) for other capital market driven transactions, the liquidation period shall be 10 business days.
Where an institution has a transaction or netting set which meets the criteria set out in Article 285(2), (3) and (4), the minimum holding period shall be brought in line with the margin period of risk that would apply under those paragraphs.

3. In Tables 1 to 4 of paragraph 1 and in paragraphs 4 to 6, the credit quality step with which a credit assessment of the debt security is associated is the credit quality step with which the credit assessment is determined by EBA to be associated under Chapter 2.

For the purpose of determining the credit quality step with which a credit assessment of the debt security is associated referred to in the first subparagraph, Article 197(7) also applies.

4. For non-eligible securities or for commodities lent or sold under repurchase transactions or securities or commodities lending or borrowing transactions, the volatility adjustment is the same as for non-main index equities listed on a recognised exchange.

5. For eligible units in CIUs the volatility adjustment is the weighted average volatility adjustments that would apply, having regard to the liquidation period of the transaction as specified in paragraph 2, to the assets in which the fund has invested.

Where the assets in which the fund has invested are not known to the institution, the volatility adjustment is the highest volatility adjustment that would apply to any of the assets in which the fund has the right to invest.

6. For unrated debt securities issued by institutions and satisfying the eligibility criteria in Article 197(4) the volatility adjustments is the same as for securities issued by institutions or corporates with an external credit assessment associated with credit quality step 2 or 3.
 

 

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