May a client relying on Article 305(2) to calculate own funds requirements for its trade exposures for CCP-related transactions with its clearing member in accordance with Article 306, rely on the exemption in Article 400 as regards such CCP-related transactions? Legal Reference: Article 295(1), 400, 305 and 306
Article 395(1) sets limits to the large exposures of an institution. Pursuant to article 400 exposures to a central counterparty are exempt from these limits. Accordingly the question arises as to whether a client relying on Article 305(2) to calculate own funds requirements for its trade exposures for CCP-related transactions with its clearing member in accordance with Article 306 may also rely on the exemption in Article 400 as regards such CCP-related transactions? The BCBS/IOSCO consultative document provides that "when the transaction of a client with a clearing member is treated as one with a Q-CCP under the solvency regime, the client may also treat this exposure under the large exposures framework as one with the Q-CCP, and not with the clearing member"
Trade exposures, including those described under Article 305(2) of Regulation (EU) No. 575/2013 (CRR) are exempted from the application of Article 395(1) of the CRR in accordance with Article 400(1)(j). Thus, the client's transactions with the clearing member are treated as if the client acted directly with the CCP. This is consistent with the following provision:
Pursuant to Article 4(1)(91) of the CRR, the definition of 'trade exposures' also refers to the exposures of clients to a CCP arising from contracts and transactions listed in points (a) to (e) of Article 301(1), meaning that the exemption specified in Article 400(1)(j) of the CRR also covers trade exposures of clients to CCPs arising from CCP-related transactions between the clearing member and the client.
Update 16.09.2021: This Q&A has been archived in light of the change(s) in Article 395 to Regulation (EU) No 575/2013 (CRR), applicable from 28.06.2021.