Article 42
Deduction of holdings of own Common Equity Tier 1 instruments
For the purposes of point (f) of Article 36(1), institutions shall calculate holdings of own Common Equity Tier 1 instruments on the basis of gross long positions subject to the following exceptions:
(a)
institutions may calculate the amount of holdings of own Common Equity Tier 1 instruments on the basis of the net long position provided that both the following conditions are met:
(i)
the long and short positions are in the same underlying exposure and the short positions involve no counterparty risk;
(ii)
either both the long and the short positions are held in the trading book or both are held in the non-trading book;
(b)
institutions shall determine the amount to be deducted for direct, indirect and synthetic holdings of index securities by calculating the underlying exposure to own Common Equity Tier 1 instruments included in those indices;
(c)
institutions may net gross long positions in own Common Equity Tier 1 instruments resulting from holdings of index securities against short positions in own Common Equity Tier 1 instruments resulting from short positions in the underlying indices, including where those short positions involve counterparty risk, provided that both the following conditions are met:
(i)
the long and short positions are in the same underlying indices;
(ii)
either both the long and the short positions are held in the trading book or both are held in the non-trading book.