CHAPTER VU.K. COVERED SOVEREIGN CREDIT DEFAULT SWAPS PURSUANT TO ARTICLE 4(2)

Article 17U.K.Hedged assets and liabilities

The following are cases where assets and liabilities may be hedged through a sovereign credit default swap position, provided the conditions set out in Articles 15 and 18 and in Regulation (EU) No 236/2012 are met:

(a)

a long position in the sovereign debt of the relevant issuer;

(b)

any position or portfolio used in the context of hedging exposures to the sovereign issuer referenced in the credit default swaps;

(c)

any assets or liabilities which refer to public sector entities in the [F1United Kingdom]. This includes exposures to central, regional and local administration, public sector entities or any exposure guaranteed by the referred entity and may include financial contracts, a portfolio of assets or financial obligations, interest rate or currency swap transactions where the sovereign credit default swap is used as a counterparty risk management tool for hedging exposure on financial or foreign trade contracts;

(d)

exposures to private sector entities established in the [F2United Kingdom]. The exposures in question include but are not limited to loans, counterparty credit risk (including potential exposure when regulatory capital is required for such exposure), receivables and guarantees. The assets and liabilities include but are not limited to financial contracts, a portfolio of assets or financial obligations, interest rate or currency swap transactions where the sovereign credit default swap is used as a counterparty risk management tool for hedging exposure on financial contracts or trade finance exposures;

(e)

any indirect exposures to any of the above entities obtained through exposure to indices, funds or special purpose vehicles.

Textual Amendments