2018_4364 Exposure amount for unfunded default fund contribution (UDFC) | European Banking Authority Skip to main content
European Banking Authority logo
  • Extranet
  • Log in
  • About us
    Back

    About us

    The EBA is an independent EU Authority.  We play a key role in safeguarding the integrity and robustness of the EU banking sector to support financial stability in the EU.

    Learn more
      • Mission, values and tasks
      • Organisation and governance
        • Governance structure and decision making
        • EBA within the EU institutional framework
        • Internal organisation
        • Accountability
      • Legal and policy framework
        • EBA regulation and institutional framework
        • Compliance with EBA regulatory products
      • Sustainable EBA
      • Diversity and inclusion
      • Careers
        • Vacancies
        • Meet our team
      • Budget
      • Procurement
    Close menu panel
  • Activities
    Back

    Activities

    To contribute to the stability and effectiveness of the European financial system, the EBA develops harmonised rules for financial institutions, promotes convergence of supervisory practices, monitors, and advises on the impact of financial innovation and the transition to sustainable finance.

    Start here
      • Single Rulebook
      • Implementing Basel III in Europe
      • Supervisory convergence
        • Supervisory convergence
        • Supervisory disclosure
        • Peer Reviews
        • Mediation
        • Breach of Union Law
        • Colleges
        • Training
      • Direct supervision and oversight
        • Markets in Crypto-assets
        • Digital operational resilience Act
      • Information for consumers
        • National competent authorities for consumer protection
        • How to complain
        • Personal finance at the EU level
        • Warnings
        • Financial education
        • National registers and national authorities responsible for handling complaints related to credit servicers
        • Frauds and scams
      • Research Workshops
      • Ad hoc activities
        • Our response to Covid-19
        • Brexit
    Close menu panel
  • Risk and data analysis
    Back

    Risk and data analysis

    To ensure the orderly functioning and stability of the financial system in the European Union, we monitor and analyse risks and vulnerabilities relevant for the regulation of banks and investment firms. We also facilitate information sharing among authorities and institutions through supervisory reporting and data disclosure.

    Learn more
      • Risk analysis
        • 2024 EU wide transparency exercise
        • EU-wide stress testing
        • Risk monitoring
        • Thematic analysis
      • Remuneration and diversity analysis
      • Pillar 3 data hub
      • Reporting
        • Reporting frameworks
        • Reporting Time Traveller
        • DPM data dictionary
        • Integrated reporting
        • Joint Bank Reporting Committee (JBRC)
      • Data
        • Registers and other list of institutions
        • Guides on data
        • Aggregate statistical data
        • Secondary reporting: data from Competent Authorities to the EBA
        • Data analytics tools
    Close menu panel
  • Publications and media
    Back

    Publications and media

    Communicating to all our audiences in the most effective way and using the most appropriate channels is crucial for us. Through our publications, announcements, and participation in external events, we are committed to reaching out to all our stakeholders to report about our policies, activities, and initiatives.

    Learn more
      • Publications
        • Guidelines
        • Regulatory Technical Standards
        • Implementing Technical Standards
        • Reports
        • Consultation papers
        • Opinions
        • Decisions
        • Staff papers
        • Annual reports
      • Press releases
      • Speeches
      • Interviews
      • Events
      • Media centre
        • Media gallery
        • Media resources
    Close menu panel

Breadcrumb

  1. Home
  2. Single Rulebook Q&A
  3. 2018_4364 Exposure amount for unfunded default fund contribution (UDFC)
Question ID
2018_4364
Legal act
Regulation (EU) No 575/2013 (CRR)
Topic
Market risk
Article
309
Paragraph
2
COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations
Not applicable
Article/Paragraph
Not applicable
Type of submitter
Credit institution
Subject matter
Exposure amount for unfunded default fund contribution (UDFC)
Question

How should the exposure value of UDFC from an own fund requirement and from a leverage ratio perspective be calculated?

Background on the question

Article 309(2) CRR defines “unfunded contribution” as “contributions that an institution acting as a clearing member has contractually committed to provide to a CCP after the CCP has depleted its default fund to cover the losses it incurred following the default of one or more of its clearing members.”

The treatment of unfunded default fund contribution (UDFC) from the risk weight perspective is clearly described in Articles 307-310 CRR. The calculation of the exposure amount arising from the unfunded contributions to the default fund is however not detailed in CRR.

In practice the majority of the CCPs require to apply a multiplier on the pre-funded DFC to get the nominal amount of the UDFC.

At the same time, the UDFC is an off balance sheet item and thus a credit conversion factor (CCF) should apply on this nominal amount.

The counterparty credit risk chapter (Chapter 6 of Title II of Part Three) of CRR does not define such a CCF.

Chapter 2 of Title II of Part Three (standardized approach) and Chapter 3 of Title II of Part Three (internal rating based approach) of the CRR are not applicable with regard to the default fund contribution.

The question is also relevant from the Leverage ratio perspective.

EBA Q&A 3014 gives guidance in general on default fund contribution (without distinction of the pre-funded and unfunded parts) that it needs to be taken into account in the Leverage ratio framework.

However Article 429 CRR disregards the description of the exposure calculation of the UDFC. Its classification into the Full/Medium/Low risk items in Annex I of the CRR is also not detailed.

Submission date
08/11/2018
Rejected publishing date
11/02/2022
Rationale for rejection

Please note that as part of adjustments to the Single Rulebook Q&A process, agreed by the EBA and the European Commission, it has been decided to reject outstanding questions submitted before 1 January 2020, when the Q&A process was updated as part of the last ESAs Review. In particular, the question that you have submitted has now regrettably been rejected and will not be addressed.

If you believe your question would still benefit from clarification, you are invited to resubmit your question, adapting it to reflect any legislative, regulatory or other relevant developments that may have occurred since the initial date of submission. The EBA will aim to address resubmitted questions as a matter of priority. When considering to resubmit, you are kindly requested to observe the updated admissibility criteria agreed in the context of the adjustment of the Q&A process, available in the Additional background and guidance for asking questions. We hope for your understanding.

For further information please refer to the press release and the updated Q&A page.

Status
Rejected question

Footer

EUROPEAN BANKING AUTHORITY

Our mission is to contribute to the stability and effectiveness of the European financial system through simple, consistent, transparent, fair regulation and supervision that benefits all EU citizens.


UE logoAn agency of the EU

EU Agencies Network logoEU Agencies Network

EMAS logoSustainable EBA

Contact us

  • Contacts
  • Ask a general question
  • Send a press query
  • Ask a regulatory question
  • File a complaint
  • Whistleblower reports

Stay up to date with our work

  • Subscribe to our email alerts
  • News & press RSS feed

Follow us on Social media

  • Bluesky
  • LinkedIn
  • X
  • YouTube

Find out about us

  • The EBA at a glance
  • Vacancies
  • Privacy policy
  • Legal notice
  • Cookies policy
  • Frauds and scams

Explore related sites

  • EIOPA
  • ESMA
  • ESRB
  • CEBS archive