Article 325y
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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 category Default risk weight Credit quality step 1 0,5 % Credit quality step 2 3 % Credit quality step 3 6 % Credit quality step 4 15 % Credit quality step 5 30 % Credit quality step 6 50 % Unrated 15 % Defaulted 100 % 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.