When Institutions calculated the value of exposure value pre-CRM according to Standard approach for counterparty credit risk should it consider as for every counterparty there aren't any margin agreement and collateral exchanged (Variation Margin)?
Annex II (Solvency) of "ITS on supervisory reporting" clarifies for template 34.02:
- in column 150 institutions should reported the exposure value pre-CRM for CCR netting sets shall be calculated in accordance with the methods laid down in Chapters 4 and 6 of Title II of Part Three CRR taking into account the effect of netting, but disregarding any other credit risk mitigation techniques (e.g. margin collateral).
Furthermore, collateralised business shall be handled as uncollateralised, i.e. no margining effects apply.
For example, if an institution has a single netting sets that are subject to a margin agreement with: the margin threshold (TH) equal 0€, the minimum transfer amount (MTA) equal 100,000 €; Current Market Value equal -50,000€ and VM and NICA equal 0€.
For computing the exposure value pre-CRM, if the institution considers the margin agreement then this value is equal to 1000,000€ (max(CMV-NICA-VM;TH+MTA-NICA;0)). Otherwise, if it doesn't consider margin agreement then this value is equal to 0 (max(CMV-NICA;0))
This question has been rejected because the issue it deals with is already explained or addressed in the instructions on column 0150 of template C 34.02 of Annex I to Regulation (EU) 2021/451 (ITS on Supervisory Reporting).
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