Question ID:
Legal Act:
Regulation (EU) No 575/2013 (CRR)
Leverage ratio
3(a), (4)
COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations:
Delegated Regulation (EU) 2015/62 - DR with regard to the leverage ratio
Disclose name of institution / entity:
Type of submitter:
Credit institution
Subject Matter:
Application of margin period of risk scalars for exposures to clients

Do the margin period of risk scalars on cleared transactions, asprovisions laid out in Article 304(3)(a), Article 304(4) and Article 304(5) of the CRR, also apply to the calculation of the EAD for leverage ratio purposes?

Background on the question:

Article 304(3)(a), Article304(4) and Article 304(5) CRR allowsallow an institution acting as a clearing member to multiply its EAD by a scalarapply specific provisions regarding margin period of risk (MPOR) or maturity factors when calculating the own funds requirement for its exposures to a client in accordance with the Mark-to-Market Method, the Standardised Method or the Original Exposure Method.

The ability to apply the scalarthese provisions for leverage purposes is not specifically mentioned., Moreover, and in Article 429a429c CRR, which determines how the derivative exposure value is to be calculated for leverage purposes, Article 304 CRR is not specifically referenced.

In order to maintain consistency with regard to the treatment of cleared transactions, it would seem logical to apply the margin period of risk scalars to EADprovisions for leverage purposes as well as for RWAs. This would be consistent with the overall principle that institutions should not be discouraged from providing clearing services. We assume that the references included in Article 429a429c(1) CRR are not intended to be comprehensive.

Date of submission:
Published as Final Q&A:
Final Answer:

The margin period of risk scalars, as provisions laid out in Article 304(4) (3)(a), Article 304(4) and Article 304(5) of Regulation (EU) No 575/2013 (CRR), may not be applied for the purposes of determining the exposure value of centrally cleared derivativesclearing members’ exposures to clients for the purpose of calculating the leverage ratio. Pursuant to Article 304(4) (3)(a), Article 304(4) and Article 304(5) CRR, the margin period of risk scalarsthese provisions may be applied to the EAD by an institution when calculating the own fund requirements for its exposures to a client as they reflect potentially lower risk levels in transactions with clients that are cleared via CCPs.  According to Recitals 90 to 94 of Regulation (EU) No 575/2013 (CRR), the leverage ratio is a distinct regulatory and supervisory tool, which is supplementary to risk-based own funds requirements. The exposure values of derivatives for the purpose of calculating the leverage ratio must be determined by institutions in accordance with Article 429a429c CRR.

Final Q&A
Answer prepared by:
Answer prepared by the EBA.
Note to Q&A:

Update 26.03.2021: This Q&A has been updated in the light of the changes introduced to Regulation (EU) No 575/2013 (CRR).