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
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.

Submission date
Final publishing date
Final answer

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

PCEred = E*He + C*(Hc+Hfx),

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.

Disclaimer

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