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Capital Requirements Regulation (CRR)
Article 281

Article 281 - Calculation of the exposure value

Status
In force
Selected consolidated version from
30/09/2021
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Article 281

Calculation of the exposure value

1.  
Institutions shall calculate a single exposure value at netting set level in accordance with Section 3, subject to paragraph 2 of this Article.
2.  

The exposure value of a netting set shall be calculated in accordance with the following requirements:

(a) 

institutions shall not apply the treatment referred to in Article 274(6);

(b) 

by way of derogation from Article 275(1), for netting sets that are not referred to in Article 275(2), institutions shall calculate the replacement cost in accordance with the following formula:

RC = max{CMV, 0}

where:

RC

=

the replacement cost; and

CMV

=

the current market value.

(c) 

by way of derogation from Article 275(2) of this Regulation, for netting sets of transactions: that are traded on a recognised exchange; that are centrally cleared by a central counterparty authorised in accordance with Article 14 of Regulation (EU) No 648/2012 or recognised in accordance with Article 25 of that Regulation; or for which collateral is exchanged bilaterally with the counterparty in accordance with Article 11 of Regulation (EU) No 648/2012, institutions shall calculate the replacement cost in accordance with the following formula:

RC = TH + MTA

where:

RC

=

the replacement cost;

TH

=

the margin threshold applicable to the netting set under the margin agreement below which the institution cannot call for collateral; and

MTA

=

the minimum transfer amount applicable to the netting set under the margin agreement;

(d) 

by way of derogation from Article 275(3), for multiple netting sets that are subject to a margin agreement, institutions shall calculate the replacement cost as the sum of the replacement cost of each individual netting set, calculated in accordance with paragraph 1 as if they were not margined;

(e) 

all hedging sets shall be established in accordance with Article 277a(1);

(f) 

institutions shall set to 1 the multiplier in the formula that is used to calculate the potential future exposure in Article 278(1), as follows:

image

where:

PFE

=

the potential future exposure; and

AddOn(a)

=

the add-on for risk category a;

(g) 

by way of derogation from Article 279a(1), for all transactions, institutions shall calculate the supervisory delta as follows:



δ =

left accolade

+ 1 where the transaction is a long position in the primary risk driver

– 1 where the transaction is a short position in the primary risk driver

where:

δ

=

the supervisory delta;

(h) 

the formula referred to in point (a) of Article 279b(1) that is used to compute the supervisory duration factor shall read as follows:

supervisory duration factor = E – S

where:

E

=

the period between the end date of a transaction and the reporting date; and

S

=

the period between the start date of a transaction and the reporting date;

(i) 

the maturity factor referred to in Article 279c(1) shall be calculated as follows:

(i) 

for transactions included in netting sets referred to in Article 275(1), MF = 1;

(ii) 

for transactions included in netting sets referred to in Article 275(2) and (3), MF = 0,42;

(j) 

the formula referred to in Article 280a(3) that is used to calculate the effective notional amount of hedging set j shall read as follows:

image

where:

image

=

the effective notional amount of hedging set j; and

Dj,k

=

the effective notional amount of bucket k of hedging set j;

(k) 

the formula referred to in Article 280c(3) that is used to calculate the credit risk category add-on for hedging set j shall read as follows:

image

where:

image

=

the credit risk category add-on for hedging set j; and

AddOn(Entityk)

=

the add-on for the credit reference entity k;

(l) 

the formula referred to in Article 280d(3) that is used to calculate the equity risk category add-on for hedging set j shall read as follows:

image

where:

image

=

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

AddOn(Entityk)

=

the add-on for the credit reference entity k;

(m) 

the formula referred to in Article 280e(4) that is used to calculate the commodity risk category add-on for hedging set j shall read as follows:

image

where:

image

=

the commodity risk category add-on for hedging set j; and

image

=

the add-on for the commodity reference type k.



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