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Directive 2006/48/EC of the European Parliament and of the council (repealed)Show full title
Directive 2006/48/EC of the European Parliament and of the council of 14 June 2006 relating to the taking up and pursuit of the business of credit institutions (recast) (Text with EEA relevance) (repealed)
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- Directives originating from the EU
- 2006 No. 48
- ANNEX III
- PART 1
- Netting sets, hedging sets,...
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Netting sets, hedging sets, and related terms
5.‘Netting Set’ means a group of transactions with a single counterparty that are subject to a legally enforceable bilateral netting arrangement and for which netting is recognised under Part 7 of this Annex and Articles 90 to 93. Each transaction that is not subject to a legally enforceable bilateral netting arrangement, which is recognised under Part 7 of this Annex, should be interpreted as its own netting set for the purpose of this Annex.
6.‘Risk Position’ means a risk number that is assigned to a transaction under the Standardised Method set out in Part 5 following a predetermined algorithm.
7.‘Hedging Set’ means a group of risk positions from the transactions within a single netting set for which only their balance is relevant for determining the exposure value under the Standardised Method set out in Part 5.
8.‘Margin Agreement’ means a contractual agreement or provisions of an agreement under which one counterparty shall supply collateral to a second counterparty when an exposure of that second counterparty to the first counterparty exceeds a specified level.
9.‘Margin Threshold’ means the largest amount of an exposure that remains outstanding until one party has the right to call for collateral.
10.‘Margin Period of Risk’ means the time period from the last exchange of collateral covering a netting set of transactions with a defaulting counterpart until that counterpart is closed out and the resulting market risk is re‐hedged.
11.‘Effective Maturity under the Internal Model Method, for a netting set with maturity greater than one year’ means the ratio of the sum of expected exposure over the life of the transactions in the netting set discounted at the risk‐free rate of return divided by the sum of expected exposure over one year in a netting set discounted at the risk‐free rate. This effective maturity may be adjusted to reflect rollover risk by replacing expected exposure with effective expected exposure for forecasting horizons under one year.
12.‘Cross‐Product Netting’ means the inclusion of transactions of different product categories within the same netting set pursuant to the Cross‐Product Netting rules set out in this Annex.
13.For the purposes of Part 5,‘Current Market Value (CMV)’ refers to the net market value of the portfolio of transactions within the netting set with the counterparty. Both positive and negative market values are used in computing CMV.
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