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Capital Requirements Regulation (CRR)
Article 280d

Article 280d - Equity risk category add-on

Status
In force
Selected consolidated version from
30/09/2021
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Article 280d

Equity risk category add-on

1.  

For the purposes of paragraph 2, institutions shall establish the relevant equity reference entities of the netting set in accordance with the following:

(a) 

there shall be one equity reference entity for each issuer of a reference equity instrument that underlies a single-name transaction allocated to the equity risk category; single-name transactions shall be assigned to the same equity reference entity only where the underlying reference equity instrument of those transactions is issued by the same issuer;

(b) 

there shall be one equity reference entity for each group of reference equity instruments or single-name equity derivatives that underlie a multi-name transaction allocated to the equity risk category; multi-names transactions shall be assigned to the same equity reference entity only where the group of underlying reference equity instruments or single-name equity derivatives of those transactions, as applicable, has the same constituents.

2.  

For the purposes of Article 278, institutions shall calculate the equity risk category add-on for a given netting set as follows:

image

where:

AddOnEquity

=

the equity risk category add-on;

j

=

the index that denotes all the equity risk hedging sets established in accordance with point (d) of Article 277a(1) and Article 277a(2) for the netting set; and

image

=

the equity risk category add-on for hedging set j calculated in accordance with paragraph 3.

3.  

Institutions shall calculate the equity risk category add-on for hedging set j as follows:

image

where:

image

=

the equity risk category add-on for hedging set j;

єj

=

the hedging set supervisory factor coefficient of hedging set j determined in accordance with Article 280;

k

=

the index that denotes the equity reference entities of the netting set established in accordance with paragraph 1;

image

=

the correlation factor of the equity reference entity k; where the equity reference entity k has been established in accordance with point (a) of paragraph 1,

image

; where the equity reference entity k has been established in accordance with point (b) of paragraph 1,

image

; and

AddOn(Entityk)

=

the add-on for the equity reference entity k determined in accordance with paragraph 4.

4.  

Institutions shall calculate the add-on for the equity reference entity k as follows:

image

where:

AddOn(Entityk)

=

the add-on for the equity reference entity k;

image

=

the supervisory factor applicable to the equity reference entity k; where the equity reference entity k has been established in accordance with point (a) of paragraph 1,

image

; where the equity reference entity k has been established in accordance with point (b) of paragraph 1,

image

; and

image

=

the effective notional amount of the equity reference entity k calculated as follows:

image

where:

l

=

the index that denotes the risk position.

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