http://www.legislation.gov.uk/id/eudr/2006/48

F1ANNEX VIIICREDIT RISK MITIGATION

Annotations:

Amendments (Textual)

Repealed by Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms, amending Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC (Text with EEA relevance).

F1PART 1Eligibility

F11.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F12.For the purposes of this Annex:

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F11.FUNDED CREDIT PROTECTION

F11.1.On-balance sheet netting

F13.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F14.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F11.2.Master netting agreements covering repurchase transactions and/or securities or commodities lending or borrowing transactions and/or other capital market-driven transactions

F15.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F11.3.Collateral

F16.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F11.3.1.Eligibility under all approaches and methods

F17.The following financial items may be recognised as eligible collateral under all approaches and methods:

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F18.Debt securities issued by institutions which securities do not have a credit assessment by an eligible ECAI may be recognised as eligible collateral if they fulfil the following criteria:

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F19.Units in collective investment undertakings may be recognised as eligible collateral if the following conditions are satisfied:

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F110.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F11.3.2.Additional eligibility under the Financial Collateral Comprehensive Method

F111.In addition to the collateral set out in points 7 to 10, where a credit institution uses the Financial Collateral Comprehensive Method under Part 3, the following financial items may be recognised as eligible collateral:

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F11.3.3.Additional eligibility for calculations under Articles 84 to 89

F112.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F1(a)Real estate collateral

F113.Residential real estate property which is or will be occupied or let by the owner, or the beneficial owner in the case of personal investment companies, and commercial real estate property, that is, offices and other commercial premises, may be recognised as eligible collateral where the following conditions are met:

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F114.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F115.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F116.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F117.The competent authorities of the Member States may waive the requirement for their credit institutions to comply with the condition in point 13(b) for commercial real estate property situated within the territory of that Member State, if the competent authorities have evidence that the relevant market is well-developed and long-established and that loss-rates stemming from lending secured by commercial real estate property satisfy the following conditions:

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F118.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F119.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F1(b)Receivables

F120.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F1(c)Other physical collateral

F121.The competent authorities may recognise as eligible collateral physical items of a type other than those types indicated in points 13 to 19 if satisfied as to the following:

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F1(d)Leasing

F122.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F11.4.Other funded credit protection

F11.4.1.Cash on deposit with, or cash assimilated instruments held by, a third party institution.

F123.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F11.4.2.Life insurance policies pledged to the lending credit institution

F124.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F11.4.3.Institution instruments repurchased on request

F125.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F12.UNFUNDED CREDIT PROTECTION

F12.1.Eligibility of protection providers under all approaches

F126.The following parties may be recognised as eligible providers of unfunded credit protection:

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F127.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F128.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F12.2Eligibility of protection providers under the IRB Approach which qualify for the treatment set out in Annex VII, Part 1, point 4.

F129.Institutions, insurance and reinsurance undertakings and export credit agencies which fulfil the following conditions may be recognised as eligible providers of unfunded credit protection which qualify for the treatment set out in Annex VII, Part 1, point 4:

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F13.TYPES OF CREDIT DERIVATIVES

F130.The following types of credit derivatives, and instruments that may be composed of such credit derivatives or that are economically effectively similar, may be recognised as eligible:

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F131.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F13.1.Internal hedges

F132.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F1PART 2Minimum Requirements

F11.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F12.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F11.FUNDED CREDIT PROTECTION

F11.1.On-balance sheet netting agreements (other than master netting agreements covering repurchase transactions, securities or commodities lending or borrowing transactions and/or other capital market-driven transactions).

F13.For on-balance sheet netting agreements — other than master netting agreements covering repurchase transactions, securities or commodities lending or borrowing transactions and/or other capital market-driven transactions — to be recognised for the purposes of Articles 90 to 93, the following conditions shall be satisfied:

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F11.2.Master netting agreements covering repurchase transactions and/or securities or commodities lending or borrowing transactions and/or other capital market driven transactions

F14.For master netting agreements covering repurchase transactions and/or securities or commodities lending or borrowing transactions and/or other capital market driven transactions to be recognised for the purposes of Articles 90 to 93, they shall:

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F15.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F11.3.Financial collateral

F11.3.1.Minimum requirements for the recognition of financial collateral under all Approaches and Methods

F16.For the recognition of financial collateral and gold, the following conditions shall be met.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F11.3.2.Additional minimum requirements for the recognition of financial collateral under the Financial Collateral Simple Method

F17.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F11.4.Minimum requirements for the recognition of real estate collateral

F18.For the recognition of real estate collateral the following conditions shall be met.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F11.5.Minimum requirements for the recognition of receivables as collateral

F19.For the recognition of receivables as collateral the following conditions shall be met:

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F11.6.Minimum requirements for the recognition of other physical collateral

F110.For the recognition of other physical collateral the following conditions shall be met:

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F11.7.Minimum requirements for treating lease exposures as collateralised

F111.For the exposures arising from leasing transactions to be treated as collateralised by the type of property leased, the following conditions shall be met:

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F11.8.Minimum requirements for the recognition of other funded credit protection

F11.8.1.Cash on deposit with, or cash assimilated instruments held by, a third party institution

F112.To be eligible for the treatment set out at Part 3, point 79, the protection referred to in Part 1, point 23 must satisfy the following conditions:

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F11.8.2.Life insurance policies pledged to the lending credit institution.

F113.For life insurance policies pledged to the lending credit institution to be recognised, all the following conditions shall be met:

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F12.UNFUNDED CREDIT PROTECTION AND CREDIT LINKED NOTES

F12.1.Requirements common to guarantees and credit derivatives

F114.Subject to point 16, for the credit protection deriving from a guarantee or credit derivative to be recognised the following conditions shall be met:

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F12.1.1.Operational requirements

F115.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F12.2.Sovereign and other public sector counter-guarantees

F116.Where an exposure is protected by a guarantee which is counter-guaranteed by a central government or central bank, a regional government or local authority, a public sector entity, claims on which are treated as claims on the central government in whose jurisdiction they are established under Articles 78 to 83, a multi-lateral development bank or an international organisation, to which a 0 % risk weight is assigned under or by virtue of Articles 78 to 83, or a public sector entity, claims on which are treated as claims on credit institutions under Articles 78 to 83, the exposure may be treated as protected by a guarantee provided by the entity in question, provided the following conditions are satisfied:

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F117.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F12.3.Additional requirements for guarantees

F118.For a guarantee to be recognised the following conditions shall also be met:

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F119.In the case of guarantees provided in the context of mutual guarantee schemes recognised for these purposes by the competent authorities or provided by or counter-guaranteed by entities referred to in point 16, the requirements in point 18(a) shall be considered to be satisfied where either of the following conditions are met:

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F12.4.Additional requirements for credit derivatives

F120.For a credit derivative to be recognised the following conditions shall also be met:

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F121.A mismatch between the underlying obligation and the reference obligation under the credit derivative (i.e. the obligation used for the purposes of determining cash settlement value or the deliverable obligation) or between the underlying obligation and the obligation used for purposes of determining whether a credit event has occurred is permissible only if the following conditions are met:

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F12.5.Requirements to qualify for the treatment set out in Annex VII, Part 1, point 4

F122.To be eligible for the treatment set out in Annex VII, Part 1, point 4, credit protection deriving from a guarantee or credit derivative shall meet the following conditions:

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F1PART 3Calculating the effects of credit risk mitigation

F11.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F12.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F11.FUNDED CREDIT PROTECTION

F11.1.Credit linked notes

F13.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F11.2.On-balance sheet netting

F14.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F11.3.Master netting agreements covering repurchase transactions and/or securities or commodities lending or borrowing transactions and/or other capital market-driven transactions

F11.3.1.Calculation of the fully-adjusted exposure value

F1(a)Using the ‘Supervisory’ volatility adjustments or the ‘Own Estimates’ volatility adjustments approaches

F15.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F16.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F17.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F18.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F19.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F110.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F111.E* shall be calculated according to the following formula:

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F1(b)Using the Internal Models approach

F112.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F113.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F114.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F115.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F116.Recognition shall only be given if the competent authority is satisfied that the credit institution's risk-management system for managing the risks arising on the transactions covered by the master netting agreement is conceptually sound and implemented with integrity and that, in particular, the following qualitative standards are met:

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F117.The calculation of the potential change in value shall be subject to the following minimum standards:

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F118.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F119.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F120.The fully adjusted exposure value (E*) for credit institutions using the Internal models approach shall be calculated according to the following formula:

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F121.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F11.3.2.Calculating risk-weighted exposure amounts and expected loss amounts for repurchase transactions and/or securities or commodities lending or borrowing transactions and/or other capital market-driven transactions covered by master netting agreements

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F122.E* as calculated under points 5 to 21 shall be taken as the exposure value of the exposure to the counterparty arising from the transactions subject to the master netting agreement for the purposes of Article 80.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F123.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F11.4.Financial collateral

F11.4.1.Financial Collateral Simple Method

F124.The Financial Collateral Simple Method shall be available only where risk-weighted exposure amounts are calculated under Articles 78 to 83. A credit institution shall not use both the Financial Collateral Simple Method and the Financial Collateral Comprehensive Method, unless for the purposes of Articles 85(1) and 89(1). Credit institutions shall demonstrate to the competent authorities that this exceptional application of both methods is not used selectively with the purpose of achieving reduced minimum capital requirements and does not lead to regulatory arbitrage.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F125.Under this method, recognised financial collateral is assigned a value equal to its market value as determined in accordance with Part 2, point 6.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F126.The risk weight that would be assigned under Articles 78 to 83 if the lender had a direct exposure to the collateral instrument shall be assigned to those portions of exposure values collateralised by the market value of recognised collateral. For this purpose, the exposure value of an off-balance sheet item listed in Annex II shall be 100 % of its value rather than the exposure value indicated in Article 78(1). The risk weight of the collateralised portion shall be a minimum of 20 % except as specified in points 27 to 29. The remainder of the exposure value shall receive the risk weight that would be assigned to an unsecured exposure to the counterparty under Articles 78 to 83.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F127.A risk weight of 0 % shall be assigned to the collateralised portion of the exposure arising from transactions which fulfil the criteria enumerated in points 58 and 59. If the counterparty to the transaction is not a core market participant a risk weight of 10 % shall be assigned.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F128.A risk weight of 0 % shall, to the extent of the collateralisation, be assigned to the exposure values determined under Annex III for the derivative instruments listed in Annex IV and subject to daily marking-to-market, collateralised by cash or cash-assimilated instruments where there is no currency mismatch. A risk weight of 10 % shall be assigned to the extent of the collateralisation to the exposure values of such transactions collateralised by debt securities issued by central governments or central banks which are assigned a 0 % risk weight under Articles 78 to 83.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F129.A 0 % risk weight may be assigned where the exposure and the collateral are denominated in the same currency, and either:

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F11.4.2.Financial Collateral Comprehensive Method

F130.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F131.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F132.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F1(a)Calculating adjusted values

F133.The volatility-adjusted value of the collateral to be taken into account is calculated as follows in the case of all transactions except those transactions subject to recognised master netting agreements to which the provisions set out in points 5 to 23 are applied:

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F1(b)Calculation of volatility adjustments to be applied

F134.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F135.A credit institution may choose to use the Supervisory volatility adjustments approach or the Own estimates approach independently of the choice it has made between the Articles 78 to 83 and Articles 84 to 89 for the calculation of risk-weighted exposure amounts. However, if credit institutions seek to use the Own estimates approach, they must do so for the full range of instrument types, excluding immaterial portfolios where they may use the Supervisory volatility adjustments approach.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F1(i)Supervisory volatility adjustments

F136.The volatility adjustments to be applied under the Supervisory volatility adjustments approach (assuming daily revaluation) shall be those set out in Tables 1 to 4.

VOLATILITY ADJUSTMENTS

F1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F137.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F138.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F139.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F140.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F141.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F1(ii)Own estimates of volatility adjustments

F142.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F143.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F144.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F145.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F146.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F147.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F148.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F149.Credit institutions may use volatility adjustment numbers calculated according to shorter or longer liquidation periods, scaled up or down to the liquidation period set out in point 48 for the type of transaction in question, using the square root of time formula:

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F150.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F151.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F152.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F153.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F154.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F155.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F156.An independent review of the credit institution's system for the estimation of volatility adjustments shall be carried out regularly in the credit institution's own internal auditing process. A review of the overall system for the estimation of volatility adjustments and for integration of those adjustments into the credit institution's risk management process shall take place at least once a year and shall specifically address, at a minimum:

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F1(iii)Scaling up of volatility adjustments

F157.The volatility adjustments set out in points 36 to 41 are the volatility adjustments to be applied where there is daily revaluation. Similarly, where a credit institution uses its own estimates of the volatility adjustments in accordance with points 42 to 56, these must be calculated in the first instance on the basis of daily revaluation. If the frequency of revaluation is less than daily, larger volatility adjustments shall be applied. These shall be calculated by scaling up the daily revaluation volatility adjustments, using the following ‘square root of time’ formula:

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F1(iv)Conditions for applying a 0 % volatility adjustment

F158.In relation to repurchase transactions and securities lending or borrowing transactions, where a credit institution uses the Supervisory Volatility Adjustments Approach or the Own Estimates Approach and where the conditions set out in points (a) to (h) are satisfied, credit institutions may, instead of applying the volatility adjustments calculated under points 34 to 57, apply a 0 % volatility adjustment. This option is not available in respect of credit institutions using the internal models approach set out in points 12 to 21:

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F159.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F1(c)Calculating risk-weighted exposure amounts and expected loss amounts

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F160.E* as calculated under point 33 shall be taken as the exposure value for the purposes of Article 80. In the case of off-balance sheet items listed in Annex II, E* shall be taken as the value at which the percentages indicated in Article 78(1) shall be applied to arrive at the exposure value.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F161.LGD* (the effective LGD)calculated as set out in this point shall be taken as the LGD for the purposes of Annex VII.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F11.5.Other eligible collateral for Articles 84 to 89

F11.5.1.Valuation

F1(a)Real estate collateral

F162.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F163.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F164.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F165.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F1(b)Receivables

F166.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F1(c)Other physical collateral

F167.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F11.5.2.Calculating risk-weighted exposure amounts and expected loss amounts

F1(a)General treatment

F168.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F169.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F170.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F171.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F172.Table 5 sets out the applicable LGD* and required collateralisation levels for the secured parts of exposures.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F1(b)Alternative treatment for real estate collateral

F173.Subject to the requirements of this point and point 74 and as an alternative to the treatment in points 68 to 72, the competent authorities of a Member State may authorise credit institutions to assign a 50 % risk weight to the Part of the exposure fully collateralised by residential real estate property or commercial real estate property situated within the territory of the Member State if they have evidence that the relevant markets are well-developed and long-established with loss-rates from lending collateralised by residential real estate property or commercial real estate property respectively that do not exceed the following limits:

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F174.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F175.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F11.6.Calculating risk-weighted exposure amounts and expected loss amounts in the case of mixed pools of collateral

F176.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F177.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F178.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F11.7.Other funded credit protection

F11.7.1.Deposits with third party institutions

F179.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F11.7.2.Life insurance policies pledged to the lending credit institution

F180.Where the conditions set out in Part 2, point 13 are satisfied, the portion of the exposure collateralised by the current surrender value of credit protection falling within the terms of Part 1, point 24 shall be either of the following:

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F180a.For purposes of point 80(a), the following risk weights shall be assigned on the basis of the risk weight assigned to a senior unsecured exposure to the company providing the life insurance:

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F11.7.3.Institution instruments repurchased on request

F181.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F182.The value of the credit protection recognised shall be the following:

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F12.UNFUNDED CREDIT PROTECTION

F12.1.Valuation

F183.The value of unfunded credit protection (G) shall be the amount that the protection provider has undertaken to pay in the event of the default or non-payment of the borrower or on the occurrence of other specified credit events. In the case of credit derivatives which do not include as a credit event restructuring of the underlying obligation involving forgiveness or postponement of principal, interest or fees that result in a credit loss event (e.g. value adjustment, the making of a value adjustment or other similar debit to the profit and loss account),

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F184.Where unfunded credit protection is denominated in a currency different from that in which the exposure is denominated (a currency mismatch) the value of the credit protection shall be reduced by the application of a volatility adjustment H_FX as follows:

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F185.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F12.2.Calculating risk-weighted exposure amounts and expected loss amounts

F12.2.1.Partial protection — tranching

F186.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F12.2.2.Standardised Approach

F1(a)Full protection

F187.For the purposes of Article 80, g shall be the risk weight to be assigned to an exposure, the exposure value (E) of which is fully protected by unfunded protection (G_A), where:

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F1(b)Partial protection — equal seniority

F188.Where the protected amount is less than the exposure value and the protected and unprotected parts are of equal seniority — i.e. the credit institution and the protection provider share losses on a pro-rata basis, proportional regulatory capital relief shall be afforded. For the purposes of Article 80, risk-weighted exposure amounts shall be calculated in accordance with the following formula:

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F1(c)Sovereign guarantees

F189.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F12.2.3.IRB Approach

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F190.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F191.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F192.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F1PART 4Maturity Mismatches

F11.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F12.Where there is a maturity mismatch the credit protection shall not be recognised where:

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F11.DEFINITION OF MATURITY

F13.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F14.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F15.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F12.VALUATION OF PROTECTION

F12.1.Transactions subject to funded credit protection — Financial Collateral Simple Method

F16.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F12.2.Transactions subject to funded credit protection — Financial Collateral Comprehensive Method

F17.The maturity of the credit protection and that of the exposure must be reflected in the adjusted value of the collateral according to the following formula:

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F12.3.Transactions subject to unfunded credit protection

F18.The maturity of the credit protection and that of the exposure must be reflected in the adjusted value of the credit protection according to the following formula