Question ID
2016_2838
Legal act
Regulation (EU) No 575/2013 (CRR)
Topic
Leverage ratio
Article
128
Paragraph
2
Subparagraph
(b)
COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations
Not applicable
Article/Paragraph
na
Type of submitter
Individual
Subject matter
Max amount of cash leverage in the mandate of an AIF in order to NOT be considered as a high risk exposure
Question

What is the maximum permitted “cash leverage” allowed in the mandate of the alternative investment fund (AIF) in order not be considered high risk?

In the event the AIF is NOT considered to be high risk, should then Article 132 CRR be taken as reference?

Background on the question

I am trying to understand the risk weight requirement for a bank that invests into an AIF and how the use of cash leverage influences such requirement.

Article 128(2)(b) CRR states that an investment into a AIF as defined in Article 4(1)(a) of Directive 2011/61/EU is an exposure with particularly high risks EXCEPT where the mandate of the fund does not allow a leverage higher than that required under Article 51(3) of Directive 2009/65/EC (UCITS Directive).

Article 51(3) of Directive 2009/65/EC only refers to derivatives instruments, rather than, for example, traditional bank leverage (cash) that the AIF may use in order to buy additional assets in order to achieve higher yield (i.e. AIF obtains a loan from third party (cash) that is reinvested).

Submission date
Rejected publishing date
Rationale for rejection

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Status
Rejected question