2013_662 What value should be used by a CCP as the reduced potential future credit exposure for securities financing transactions to calculate the concentration factor (β)?

Question ID:

2013_662

Legal Act:

Regulation (EU) No 575/2013 (CRR)

Topic:

Market infrastructures

Article:

520

COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations:

Not applicable

Article/Paragraph:

not applicable

Disclose name of institution / entity:

Type of submitter:

Competent authority

Subject Matter:

What value should be used by a CCP as the reduced potential future credit exposure for securities financing transactions to calculate the concentration factor (β)?

Question:

What value should be used as the reduced potential future credit exposure for securities financing transactions to calculate the concentration factor (β) for the purpose of Article 50d(c) of Regulation (EU) No 648/2012 (introduced by Article 520 of Regulation (EU) No 575/2013 (CRR))?

Background on the question:

According to Article 50d(c) of Regulation (EU) No 648/2012 (introduced by Article 520 of CRR) a CCP shall calculate the concentration factor (β) in accordance with the following formula; β=(PCE(red,1) + PCE(red,2))/∑iPCE(red,i) where PCEred,i is the reduced figure for potential future credit exposure for all contracts and transactions of a CCP with clearing member i. CRR does not however set out the definition/the way of calculation of PCEred,i for securities financing transactions.

Date of submission:

16/12/2013

Published as Final Q&A:

12/09/2014

Final Answer:

The potential future credit exposure for securities financing transactions should be calculated in accordance with the following formula:

PCE_red = E*H_e + C*(H_c+H_fx),

where E, H and C are defined in Article 223 of Regulation (EU) No. 575/2013 (CRR).

Article 50b(a)(ii) of Regulation (EU) No. 648/2012 (EMIR)(as amended by Article 520 of the CRR) clearly instructs the central counterparty to use this treatment for repurchase agreements.

Status:

Final Q&A

Answer prepared by:

Answer prepared by the EBA.

Note to Q&A:

Update 26.03.2021: This Q&A has been reviewed in the light of the changes introduced to Regulation (EU) No 575/2013 (CRR) and continues to be relevant until 28.06.2021.