Article 325y

Path:
Capital Requirements Regulation (CRR) > PART THREE > TITLE IV > CHAPTER 1a > Section 5 > Subsection 1 > Article 325y
Title:
Article 325y
Description: 
Calculation of the own funds requirements for the default risk
Main content: 

1. Net JTD amounts, irrespective of the type of counterparty, shall be multiplied by the default risk weights that correspond to their credit quality, as specified in Table 2:

Table 2
Credit quality categoryDefault risk weight
Credit quality step 10,5 %
Credit quality step 23 %
Credit quality step 36 %
Credit quality step 415 %
Credit quality step 530 %
Credit quality step 650 %
Unrated15 %
Defaulted100 %

2. Exposures which would receive a 0 % risk-weight under the Standardised Approach for credit risk in accordance with Chapter 2 of Title II shall receive a 0 % default risk weight for the own funds requirements for the default risk.

3. The weighted net JTD shall be allocated to the following buckets: corporates, sovereigns, and local governments/municipalities.

4. Weighted net JTD amounts shall be aggregated within each bucket, in accordance with the following formula:

DRCb = max {}{(Σi ∈ long RWi · net JTDi) – WtS · (Σi ∈ short RWi · |net JTDi|); 0}}

where:

DRCb=the own funds requirement for the default risk for bucket b;
i=the index that denotes an instrument belonging to bucket b;
RWi=the risk weight; and
WtS=

a ratio recognising a benefit for hedging relationships within a bucket, which shall be calculated as follows:

 
For the purposes of calculating the DRCb and the WtS, the long positions and short positions shall be aggregated for all positions within a bucket, regardless of the credit quality step to which those positions are allocated, to produce the bucket-specific own funds requirements for the default risk.

5. The final own funds requirement for the default risk for non-securitisations shall be calculated as the simple sum of the bucket-level own funds requirements.