In respect of hedges for the purpose of Article 4(1)(b) of Regulation (EU) No 236/2012, the sovereign credit default swap shall not be considered an uncovered position in accordance with Article 4(1) of Regulation (EU) No 236/2012 and shall serve to hedge against the risk of decline in the value of assets or liabilities correlated with the risk of the decline of the value of the sovereign debt which the credit default swap references and where those assets or liabilities refer to public or private sector entities in the F1United Kingdom.

A sovereign credit default swap position, in which assets or liabilities refer to public or private sector entities in the F2United Kingdom as the reference sovereign for the credit default swap, shall not be considered an uncovered position in accordance with Article 4(1) of Regulation (EU) No 236/2012 where it:

1. (i)

   F3references the United Kingdom, including any government department, agency or special purpose vehicle of the United Kingdom;

2. (ii)

   is used to hedge any assets or liabilities meeting the correlation test set out in Article 18.

A sovereign credit default swap position, where the assets or liabilities refer to a sovereign issuer in which the reference sovereign for the credit default swap is a guarantor or shareholder, shall not be considered an uncovered position in accordance with Article 4(1) of Regulation (EU) No 236/2012 where it:

1. (i)

   references F4the United Kingdom;

2. (ii)

   is used to hedge any assets or liabilities meeting the correlation test set out in Article 18.