Article 280c | CRR | Regulation 575/2013

Article 280c - Credit risk category add-on

Article 280c

Credit risk category add-on

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

(a)

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

(b)

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

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

where:

AddOnCredit

credit risk category add-on;

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

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

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

where:

the credit 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;

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

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

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

; and

AddOn(Entityk)

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

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

where:

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

where:

the index that denotes the risk position; and

the supervisory factor applicable to the credit reference entity k calculated in accordance with paragraph 5.

Institutions shall calculate the supervisory factor applicable to the credit reference entity k as follows:

(a)

for the credit reference entity k established in accordance with point (a) of paragraph 1,

shall be mapped to one of the six supervisory factors set out in Table 3 of this paragraph on the basis of an external credit assessment by a nominated ECAI of the corresponding individual issuer; for an individual issuer for which a credit assessment by a nominated ECAI is not available:

(i)

an institution using the approach referred to in Chapter 3 shall map the internal rating of the individual issuer to one of the external credit assessments;

(ii)

an institution using the approach referred to in Chapter 2 shall assign

to that credit reference entity; however, where an institution applies Article 128 to risk weight counterparty credit risk exposures to that individual issuer,

shall be assigned to that credit reference entity;

(b)

for the credit reference entity k established in accordance with point (b) of paragraph 1:

(i)

where a risk position l assigned to the credit reference entity k is a credit index listed on a recognised exchange,

shall be mapped to one of the two supervisory factors set out in Table 4 of this paragraph on the basis of the credit quality of the majority of its individual constituents;

(ii)

where a risk position l assigned to the credit reference entity k is not referred to in point (i) of this point,

shall be the weighted average of the supervisory factors mapped to each constituent in accordance with the method set out in point (a), where the weights are defined by the proportion of notional of the constituents in that position.

Table 3

Credit quality step	Supervisory factor for single-name transactions
1	0,38 %
2	0,42 %
3	0,54 %
4	1,06 %
5	1,6 %
6	6,0 %

Table 4

Dominant credit quality	Supervisory factor for quoted indices
Investment grade	0,38 %
Non-investment grade	1,06 %

PART ONE - GENERAL PROVISIONS (Article 1-24)

PART TWO - OWN FUNDS AND ELIGIBLE LIABILITIES (Article 25-91)

PART THREE - CAPITAL REQUIREMENTS (Article 92-386)

TITLE I - GENERAL REQUIREMENTS, VALUATION AND REPORTING (Article 92-106)

TITLE II - CAPITAL REQUIREMENTS FOR CREDIT RISK (Article 107-311)

CHAPTER 1 - General principles (Article 107-110)

CHAPTER 2 - Standardised approach (Article 111-141)

CHAPTER 3 - Internal Ratings Based Approach (Article 142-191)

CHAPTER 4 - Credit risk mitigation (Article 192-241)

CHAPTER 5 - Securitisation (Article 242-270e)

CHAPTER 6 - Counterparty credit risk (Article 271-311)

Section 1 - Definitions (Article 271-272)

Section 2 - Methods for calculating the exposure value (Article 273-273b)

Section 3 - Standardised approach for counterparty credit risk (Article 274-280f)Article 274 - Exposure value Q&A Article 275 - Replacement cost Q&A Article 276 - Recognition and treatment of collateral Article 277 - Mapping of transactions to risk categories RTS Article 277a - Hedging sets Article 278 - Potential future exposure Article 279 - Calculation of the risk position Article 279a - Supervisory delta RTSQ&A Article 279b - Adjusted notional amount Q&A Article 279c - Maturity Factor Q&A Article 280 - Hedging set supervisory factor coefficient Article 280a - Interest rate risk category add-on Q&A Article 280b - Foreign exchange risk category add-on Article 280c - Credit risk category add-on Q&A Article 280d - Equity risk category add-on Article 280e - Commodity risk category add-on Article 280f - Other risks category add-on

Section 4 - Simplified standardised approach for counterparty credit risk (Article 281)

Section 5 - Original exposure method (Article 282)

Section 6 - Internal Model Method (Article 283-294)

Section 7 - Contractual netting (Article 295-298)

Section 8 - Items in the trading book (Article 299)

Section 9 - Own funds requirements for exposures to a central counterparty (Article 300-311)

TITLE III - OWN FUNDS REQUIREMENTS FOR OPERATIONAL RISK (Article 312-324)

TITLE IV - OWN FUNDS REQUIREMENTS FOR MARKET RISK (Article 325-377)

TITLE V - OWN FUNDS REQUIREMENTS FOR SETTLEMENT RISK (Article 378-380)

TITLE VI - OWN FUNDS REQUIREMENTS FOR CREDIT VALUATION ADJUSTMENT RISK (Article 381-386)

PART FOUR - LARGE EXPOSURES (Article 387-403)

PART FIVE - EXPOSURES TO TRANSFERRED CREDIT RISK (Article 404-410)

PART SIX - LIQUIDITY (Article 411-428az)

PART SEVEN - LEVERAGE (Article 429-429g)

PART SEVEN A - REPORTING REQUIREMENTS (Article 430-430c)

PART EIGHT - DISCLOSURE BY INSTITUTIONS (Article 431-455)

PART NINE - DELEGATED AND IMPLEMENTING ACTS (Article 456-464)

PART TEN - TRANSITIONAL PROVISIONS, REPORTS, REVIEWS AND AMENDMENTS (Article 465-520)

PART ELEVEN - FINAL PROVISIONS (Article 521)

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Article 280c - Credit risk category add-on

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