Article 418
Valuation of liquid assets
1.
The value of a liquid asset to be reported shall be its market value, subject to appropriate haircuts that reflect at least the duration, the credit and liquidity risk and typical repo haircuts in periods of general market stress. The haircuts shall not be less than 15 % for the assets referred to in point (d) of Article 416(1). If the institution hedges the price risk associated with an asset, it shall take into account the cash flow resulting from the potential close-out of the hedge.
2.
Shares or units in CIUs as referred to in Article 416(6) shall be subject to haircuts, looking through to the underlying assets as follows:
(a)
0 % for the assets referred to in point (a) of Article 416(1);
(b)
5 % for the assets referred to in points (b) and (c) of Article 416(1);
(c)
20 % for the assets referred to in point (d) of Article 416(1).
3.
The look-through approach referred to in paragraph 2 shall be applied as follows:
(a)
where the institution is aware of the underlying exposures of a CIU, it may look through to those underlying exposures in order to assign them to points (a) to (d) of Article 416(1);
(b)
where the institution is not aware of the underlying exposures of a CIU, it shall be assumed that the CIU invests, to the maximum extent allowed under its mandate, in descending order in the asset types referred to in points (a) to (d) of Article 416(1) until the maximum total investment limit is reached.
4.
Institutions shall develop robust methodologies and processes to calculate and report the market value and haircuts for shares or units in CIUs. Only where they can demonstrate to the satisfaction of the competent authority that the materiality of the exposure does not justify the development of their own methodologies, institutions may rely on the following third parties to calculate and report the haircuts for shares or units in CIUs, in accordance with the methods set out in points (a) and (b) of paragraph 3:
(a)
the depository institution of the CIU provided that the CIU exclusively invests in securities and deposits all securities at this depository institution;
The correctness of the calculations by the depository institution or the CIU management company shall be confirmed by an external auditor.