Is it possible to use a risk weight according to Article 107(2)(a) of Regulation (EU) No 575/2013 (CRR) for trade exposures with a clearing member, where the institution is a client of a qualifying CCP, which is acting as a general clearing member of a non-qualifying CCP?
According to Article 305(1) CRR, where an institution is a client, it shall calculate the own funds requirements for its CCP-related transactions with its clearing member in accordance with Sections 1 to 8 of Chapter 6 and with Title VI of Part Three, as applicable.
According to Article 107(2) CRR, for trade exposures and for default fund contributions to a CCP, institutions shall apply the treatment set out in Chapter 6, Section 9 to calculate their risk-weighted exposure amounts for the purposes of points (a) and (f) of Article 92(3) CRR.
For all other types of exposures to a central counterparty, institutions shall treat those exposures either:
a) as exposures to an institution for qualifying CCPs; or
b) as exposures to a corporate for other types of exposures to a non-qualifying CCP.
It is not clear whether the qualifying CCP acting as a general clearing member of a non-qualifying CCP is considered to a CCP in respect of Article 107 CRR.
According to Article 305(1) of Regulation (EU) No 575/2013 (CRR), an institution client of centrally cleared transactions shall calculate its own fund requirements for these CCP-related transactions according to Part III, Title II, Chapter VI, Sections 1 to 8.
Where the institution is a client of a qualifying CCP, which is acting as a general clearing member of a non-qualifying CCP, the institution shall treat contracts cleared by the NQCCP for the purpose of computing capital requirements as bilateral OTC transactions and therefore refer to Part III, Title II, Chapter VI, Sections 1 to 8, and in particular, to Article 107(2)(b) CRR.
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.