Capital Requirements Regulation

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Article 153 Risk-weighted exposure amounts for exposures to corporates, institutions and central governments and central banks 1. Subject to the application of the specific treatments laid down in paragraphs 2, 3 and 4, the risk-weighted exposure amounts for exposures to corporates, institutions and central governments and central banks shall be calculated according to the following formulae: Risk – weighted exposure amount = RW · exposure value where the risk weight RW is defined as (i) if PD = 0, RW shall be 0; (ii) if PD = 1, i.e., for defaulted exposures: where institutions apply the LGD values set out in Article 161(1), RW shall be 0; where institutions use own estimates of LGDs, RW shall be RW = max 0,12.5 · LGD – RWmax 0;12.5LGD ELBE; where the expected loss best estimate (hereinafter referred to as ELBE) shall be the institution's best estimate of expected loss for the defaulted exposure in accordance with Article 181(1)(h); (iii) if 0 < PD < 1 RW = RWLGD N11 R GPDR1 R G0.999 LGD · N11 – R · GPD + R1 – R · G0.999 – LGD · PD · 1 + M – 2,5 · b1 – 1,5 · b · 12,5 · 1,06 where: N(x) the cumulative distribution function for a standard normal random variable (i.e. the probability that a normal random variable with mean zero and variance of one is less than or equal to x); G(Z) denotes the inverse cumulative distribution function for a standard normal random variable (i.e. the value x such that N(x) = z) R denotes the coefficient of correlation, is defined asR = 0.12 · asR0.12 1 – e– e 50 · PD1 – e– e 500.24 1 1 e 50 + 0.24 · 1 – 1 – e– 50 · PD1 – e– e 50 b the maturity adjustment factor, which is defined as b = 0.11852 – b0.11852 0.05478 · lnPD2. 2. For all exposures to large financial sector entities, the co-efficient of correlation of paragraph 1(iii) is multiplied by 1,25. For all exposures to unregulated financial sector entities, the coefficients of correlation set out in paragraph 1(iii) and paragraph 4, as relevant, are multiplied by 1,25. 3. The risk-weighted exposure amount for each exposure which meets the requirements set out in Articles 202 and 217 may be adjusted in accordance with the following formula: Risk – weighted exposure amount = RW · exposure value · (0.15 + 160 · PDpp) where: PDpp PD of the protection provider. RW shall be calculated using the relevant risk weight formula set out in point 1 for the exposure, the PD of the obligor and the LGD of a comparable direct exposure to the protection provider. The maturity factor (b) shall be calculated using the lower of the PD of the protection provider and the PD of the obligor. 4. For exposures to companies where the total annual sales for the consolidated group of which the firm is a part is less than EUR 50 million, institutions may use the following correlation formula in paragraph 1 (iii) for the calculation of risk weights for corporate exposures. In this formula S is expressed as total annual sales in millions of euro with EUR 5 million ≤ S ≤ EUR 50 million. Reported sales of less than EUR 5 million shall be treated as if they were equivalent to EUR 5 million. For purchased receivables the total annual sales shall be the weighted average by individual exposures of the pool.R = 0.12 · pool.R0.12 1 – e– e 50 · PD1 – e– e 500.24 1 1 e 50 + 0.24 · PD1 e 50 0.04 1 – 1 – e– 50 · PD1 – e– 50 – 0.04 · 1 – minmax5,S,50 – 545 Institutions shall substitute total assets of the consolidated group for total annual sales when total annual sales are not a meaningful indicator of firm size and total assets are a more meaningful indicator than total annual sales. 5. For specialised lending exposures … 431 unchanged words … draft regulatory technical standards to the Commission by 31 December 2014. Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.

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Article 154 Risk-weighted exposure amounts for retail exposures 1. The risk-weighted exposure amounts for retail exposures shall be calculated in accordance with the following formulae: Risk – weighted exposure amount = RW · exposure value where the risk weight RW is defined as follows: (i) if PD = 1, i.e., for defaulted exposures, RW shall be RW = max 0,12.5 · RWmax 0;12.5 LGD – ELBE; where ELBE shall be the institution's best estimate of expected loss for the defaulted exposure in accordance with Article 181(1)(h); (ii) if 0 < PD < 1, i.e., for any possible value for PD other than under (i) RW = RWLGD N11 R GPDR1 R G0.999 LGD · N11 – R · GPD + R1 – R · G0.999 – LGD · PD · 12,5 · 1,06 where: N(x) the cumulative distribution function for a standard normal random variable (i.e. the probability that a normal random variable with mean zero and variance of one is less than or equal to x); G(Z) the inverse cumulative distribution function for a standard normal random variable (i.e. the value x such that N(x) = z); R the coefficient of correlation defined asR = 0.03 · asR0.03 1 – e– e 35 · PD1 – e– e 350.16 1 1 e 35 + 0.16 · 1 – 1 – e– 35 · PD1 – e– e 35 2. The risk-weighted exposure amount for each exposure to an SME as referred to in Article 147(5) which meets the requirements set out in Articles 202 and 217 may be calculated in accordance with Article 153(3). 3. For retail exposures secured by immovable … 456 unchanged words … pools of purchased retail receivables where purchasing institutions cannot separate exposures secured by immovable property collateral and qualifying revolving retail exposures from other retail exposures, the retail risk weight function producing the highest capital requirements for those exposures shall apply.

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Article 156 Risk-weighted exposure amounts for other non credit-obligation assets The risk-weighted exposure amounts for other non credit-obligation assets shall be calculated in accordance with the following formula: Risk – weighted exposure amount = 100 % · exposure value, except for: (a) cash in hand and equivalent cash items as well as gold bullion held in own vault or on an allocated basis to the extent backed by bullion liabilities, in which case a 0 % risk-weight shall be assigned; (b) when the exposure is a residual value of leased assets in which case it shall be calculated as follows: 1t · 100 % · exposure value where t is the greater of 1 and the nearest number of whole years of the lease remaining.

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Article 162 Maturity 1. Institutions that have not received permission to use own LGDs and own conversion factors for exposures to corporates, institutions or central governments and central banks shall assign to exposures arising from repurchase transactions or securities or commodities lending or borrowing transactions a maturity value (M) of 0,5 years and to all other exposures M of 2,5 years. Alternatively, as part of the permission referred to in Article 143, the competent authorities shall decide on whether the institution shall use maturity (M) for each exposure as set out under paragraph 2. 2. Institutions that have received the permission of the competent authority to use own LGDs and own conversion factors for exposures to corporates, institutions or central governments and central banks pursuant to Article 143 shall calculate M for each of these exposures as set out in points (a) to (e) of this paragraph and subject to paragraphs 3 to 5 of this Article. M shall be no greater than five years except in the cases specified in Article 384(1) where M as specified there shall be used: (a) for an instrument subject to a cash flow schedule, M shall be calculated in accordance with the following formula: M = max1,minΣtt · CFtΣtCFt,5 Mmax1, mintt CFttCFt,5 where CFt denotes the cash flows (principal, interest payments and fees) contractually payable by the obligor in period t; (b) for derivatives subject to a master netting agreement, M shall be the weighted average remaining maturity of the exposure, where M … 335 unchanged words … the exposure values, M shall be calculated for exposures to which they apply this method and for which the maturity of the longest-dated contract contained in the netting set is greater than one year in accordance with the following formula: M = minΣkEffectiveEEtk · MminkEffective EEtk Δtk · dftk · stk + ΣkEEtk · stkkEEtk Δtk · dftk1 stkkEffective EEtk Δtk dftk · 1 – stkΣkEffectiveEEtk · Δtk · dftk · stk,5 where: Stk a dummy variable whose value at future period tk is equal to 0 if tk > 1 year and to 1 if tk ≤ 1; EEtk the expected exposure at the future period tk; EffectiveEEtk Effective EEtk the effective expected exposure at the future period tk; dftk the risk-free discount factor for future time period tk; Δtk = tk – tk–1; tk1; (h) an institution that uses an internal model to calculate a one-sided credit valuation adjustment (CVA) may use, subject to the permission of the competent authorities, the effective credit duration estimated by the internal model as M. Subject to paragraph 2, … 352 unchanged words … paragraph 1 instead of applying paragraph 2. Institutions may replace EUR 500 million total assets with EUR 1000 million total assets for corporates which primarily own and let non-speculative residential property. 5. Maturity mismatches shall be treated as specified in Chapter 4.

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Article 220 Using the Supervisory Volatility Adjustments Approach or the Own Estimates Volatility Adjustments Approach for master netting agreements 1. When institutions calculate the 'fully adjusted exposure value' (E*) for the exposures subject to an eligible master netting agreement covering repurchase transactions or securities or commodities lending or borrowing transactions or other capital market-driven transactions, they shall calculate the volatility adjustments that they need to apply either by using the Supervisory Volatility Adjustments Approach or the Own Estimates Volatility Adjustments Approach ('Own Estimates Approach') as set out in Articles 223 to 226 for the Financial Collateral Comprehensive Method. The use of the Own Estimates Approach shall be subject to the same conditions and requirements as apply under the Financial Collateral Comprehensive Method. 2. For the purpose of calculating E*, institutions shall: (a) calculate the net position in each group of securities or in each type of commodity by subtracting the amount in point (ii) from the amount in point (i): (i) the total value of a group of securities or of commodities of the same type lent, sold or provided under the master netting agreement; (ii) the total value of a group of securities or of commodities of the same type borrowed, purchased or received under the master netting agreement; (b) calculate the net position in each currency, other than the settlement currency of the master netting agreement, by subtracting the amount in point (ii) from the amount in point (i): (i) the sum of the total value of securities denominated in that currency lent, sold or provided under the master netting agreement and the amount of cash in that currency lent or transferred under that agreement; (ii) the sum of the total value of securities denominated in that currency borrowed, purchased or received under the master netting agreement and the amount of cash in that currency borrowed or received under that agreement; (c) apply the volatility adjustment appropriate to a given group of securities or to a cash position to the absolute value of the positive or negative net position in the securities in that group; (d) apply the foreign exchange risk (fx) volatility adjustment to the net positive or negative position in each currency other than the settlement currency of the master netting agreement. 3. Institutions shall calculate E* in accordance with the following formula:E* = max0,ΣiEi – ΣiCi + ΣjEjsec · Hjsec + ΣkEkfx · formula:E *max0,iEi iCijEjsec HjseckEkfx Hkfx where: Ei the exposure value for each separate exposure i under the agreement that would apply in the absence of the credit protection, where institutions calculate risk-weighted exposure amounts under the Standardised Approach or where they calculate the risk-weighted exposure amounts and expected loss amounts under the IRB Approach; Ci the value of securities in each group or commodities of the same type borrowed, purchased or received or the cash borrowed or received in respect of each exposure i; Ejsec the net position (positive or negative) in a given group of securities j; Ekfx the net position (positive or negative) in a given currency k other than the settlement currency of the agreement as calculated under point (b) of paragraph 2; Hjsec the volatility adjustment appropriate to a particular group of securities j; Hkfx the foreign exchange volatility adjustment for currency k. 4. For the purpose of calculating risk-weighted exposure amounts and expected loss amounts for repurchase transactions or securities or commodities lending or borrowing transactions or other capital market-driven transactions covered by master netting agreements, institutions shall use E* as calculated under paragraph 3 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 113 under the Standardised Approach or Chapter 3 under the IRB Approach. 5. For the purposes of paragraphs 2 and 3, group of securities means securities which are issued by the same entity, have the same issue date, the same maturity, are subject to the same terms and conditions, and are subject to the same liquidation periods as indicated in Articles 224 and 225, as applicable.

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Article 221 Using the internal models approach for master netting agreements 1. Subject to permission of competent authorities, institutions may, as an alternative to using the Supervisory Volatility Adjustments Approach or the Own Estimates Approach in calculating the fully adjusted exposure value (E*) … 591 unchanged words … material price risks. An institution may use empirical correlations within risk categories and across risk categories where its system for measuring correlations is sound and implemented with integrity. 6. Institutions using the internal models approach shall calculate E* in accordance with the following formula:E* = max0,Σi formula:E *max0,i Ei – Σi i Ci + potential change in value where: Ei the exposure value for each separate exposure i under the agreement that would apply in the absence of the credit protection, where institutions calculate the risk-weighted exposure amounts under the Standardised Approach or where they calculate risk-weighted … 354 unchanged words … draft regulatory technical standards to the Commission by 31 December 2015. Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.

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Article 223 Financial Collateral Comprehensive Method 1. In order to take account of price volatility, institutions shall apply volatility adjustments to the market value of collateral, as set out in Articles 224 to 227, when valuing financial collateral for the purposes of the Financial Collateral Comprehensive Method. Where collateral is denominated in a currency that differs from the currency in which the underlying exposure is denominated, institutions shall add an adjustment reflecting currency volatility to the volatility adjustment appropriate to the collateral as set out in Articles 224 to 227. In the case of OTC derivatives transactions covered by netting agreements recognised by the competent authorities under Chapter 6, institutions shall apply a volatility adjustment reflecting currency volatility when there is a mismatch between the collateral currency and the settlement currency. Even where multiple currencies are involved in the transactions covered by the netting agreement, institutions shall apply a single volatility adjustment. 2. Institutions shall calculate the volatility-adjusted value of the collateral (CVA) they need to take into account as follows:CVA = C · 1 – HC – Hfx where: C the value of the collateral; HC the volatility adjustment appropriate to the collateral, as calculated under Articles 224 and 227; Hfx the volatility adjustment appropriate to currency mismatch, as calculated under Articles 224 and 227. Institutions shall use the formula in this paragraph when calculating the volatility-adjusted value of the collateral for all transactions except for those transactions subject to recognised master netting agreements to which the provisions set out in Articles 220 and 221 apply. 3. Institutions shall calculate the volatility-adjusted value of the exposure (EVA) they need to take into account as follows:EVA = E · follows:EVAE 1 + HE where: E the exposure value as would be determined under Chapter 2 or Chapter 3, as applicable, where the exposure was not collateralised; HE the volatility adjustment appropriate to the exposure, as calculated under Articles 224 and 227. In the case of OTC derivative transactions institutions shall calculate EVA as follows: EVA = E. 4. For the purpose of calculating E in paragraph 3, the following shall apply: (a) for institutions calculating risk-weighted exposure amounts under the Standardised Approach, the exposure value of an off-balance sheet item listed in Annex I shall be 100 % of that item's value rather than the exposure value indicated in Article 111(1); (b) for institutions calculating risk-weighted exposure amounts under the IRB Approach, they shall calculate the exposure value of the items listed in Article 166(8) to (10) by using a conversion factor of 100 % rather than the conversion factors or percentages indicated in those paragraphs. 5. Institutions shall calculate the fully adjusted value of the exposure (E*), taking into account both volatility and the risk-mitigating effects of collateral as follows:E* = max follows:E *max 0, EVA – CVAM where: EVA the volatility adjusted value of the exposure as calculated in paragraph 3; CVAM CVA further adjusted for any maturity mismatch in accordance with the provisions of Section 5; 6. Institutions may calculate volatility adjustments either by using the Supervisory Volatility Adjustments Approach referred to in Article 224 or the Own Estimates Approach referred to in Article 225. An institution may choose to use the Supervisory Volatility Adjustments Approach or the Own Estimates Approach independently of the choice it has made between the Standardised Approach and the IRB Approach for the calculation of risk-weighted exposure amounts. However, where an institution uses the Own Estimates Approach, it shall do so for the full range of instrument types, excluding immaterial portfolios where it may use the Supervisory Volatility Adjustments Approach. 7. Where the collateral consists of a number of eligible items, institutions shall calculate the volatility adjustment (H) as follows:H = ΣiaiHi follows:HiaiHi where: ai the proportion of the value of an eligible item i in the total value of collateral; Hi the volatility adjustment applicable to eligible item i.

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Article 225 Own estimates of volatility adjustments under the Financial Collateral Comprehensive Method 1. The competent authorities shall permit institutions to use their own volatility estimates for calculating the volatility adjustments to be applied to collateral and exposures where those institutions comply with the requirements set out in paragraphs 2 and 3. Institutions which have obtained permission to use their own volatility estimates shall not revert to the use of other methods except for demonstrated good cause and subject to the permission of the competent authorities. For debt securities that have a credit assessment from an ECAI equivalent to investment grade or better, institutions may calculate a volatility estimate for each category of security. For debt securities that have a credit assessment from an ECAI equivalent to below investment grade, and for other eligible collateral, institutions shall calculate the volatility adjustments for each individual item. Institutions using the Own Estimates Approach shall estimate volatility of the collateral or foreign exchange mismatch without taking into account any correlations between the unsecured exposure, collateral or exchange rates. In determining relevant categories, institutions shall take into account the type of issuer of the security, the external credit assessment of the securities, their residual maturity, and their modified duration. Volatility estimates shall be representative of the securities included in the category by the institution. 2. The calculation of the volatility adjustments shall be subject to all the following criteria: (a) institutions shall base the calculation on a 99th percentile, one-tailed confidence interval; (b) institutions shall base the calculation on the following liquidation periods: (i) 20 business days for secured lending transactions; (ii) 5 business days for repurchase transactions, except insofar as such transactions involve the transfer of commodities or guaranteed rights relating to title to commodities and securities lending or borrowing transactions; (iii) 10 business days for other capital market driven transactions; (c) institutions may use volatility adjustment numbers calculated in accordance with shorter or longer liquidation periods, scaled up or down to the liquidation period set out in point (b) for the type of transaction in question, using the square root of time formula: HM = HN · HMHN TMTN where: TM the relevant liquidation period; HM the volatility adjustment based on the liquidation period TM; HN the volatility adjustment based on the liquidation period TN. (d) institutions shall take into account the illiquidity of lower-quality assets. They shall adjust the liquidation period upwards in cases where … 367 unchanged words … of volatility adjustments; (iii) the verification of the consistency, timeliness and reliability of data sources used to run the system for the estimation of volatility adjustments, including the independence of such data sources; (iv) the accuracy and appropriateness of the volatility assumptions.

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Article 226 Scaling up of volatility adjustment under the Financial Collateral Comprehensive Method The volatility adjustments set out in Article 224 are the volatility adjustments an institution shall apply where there is daily revaluation. Similarly, where an institution uses its own estimates of the volatility adjustments in accordance with Article 225, it shall calculate them in the first instance on the basis of daily revaluation. Where the frequency of revaluation is less than daily, institutions shall apply larger volatility adjustments. Institutions shall calculate them by scaling up the daily revaluation volatility adjustments, using the following square-root-of-time formula:H = HM · NR + TM – formula:HHM NRTM 1TM where: H the volatility adjustment to be applied; HM the volatility adjustment where there is daily revaluation; NR the actual number of business days between revaluations; TM the liquidation period for the type of transaction in question.

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Article 228 Calculating risk-weighted exposure amounts and expected loss amounts under the Financial Collateral Comprehensive method 1. Under the Standardised Approach, institutions shall use E* as calculated under Article 223(5) as the exposure value for the purposes of Article 113. In the case of off-balance sheet items listed in Annex I, institutions shall use E* as the value to which the percentages indicated in Article 111(1) shall be applied to arrive at the exposure value. 2. Under the IRB Approach, institutions shall use the effective LGD (LGD*) as the LGD for the purposes of Chapter 3. Institutions shall calculate LGD* as follows:LGD* = LGD ·E*E follows:LGD*LGD E*E where: LGD the LGD that would apply to the exposure under Chapter 3 where the exposure was not collateralised; E the exposure value in accordance with Article 223(3); E* the fully adjusted exposure value in accordance with Article 223(5).

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Article 233 Valuation 1. For the purpose of calculating the effects of unfunded credit protection in accordance with this Sub-section, 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. 2. 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 the following shall apply: (a) where the amount that the protection provider has undertaken to pay is not higher than the exposure value, institutions shall reduce the value of the credit protection calculated under paragraph 1 by 40 %; (b) where the amount that the protection provider has undertaken to pay is higher than the exposure value, the value of the credit protection shall be no higher than 60 % of the exposure value. 3. Where unfunded credit protection is denominated in a currency different from that in which the exposure is denominated, institutions shall reduce the value of the credit protection by the application of a volatility adjustment as follows:G* = G · follows:G*G 1 – Hfx where: G* the amount of credit protection adjusted for foreign exchange risk, G the nominal amount of the credit protection; Hfx the volatility adjustment for any currency mismatch between the credit protection and the underlying obligation determined in accordance with paragraph 4. Where there is no currency mismatch Hfx is equal to zero. 4. Institutions shall base the volatility adjustments for any currency mismatch on a 10 business day liquidation period, assuming daily revaluation, and may calculate them based on the Supervisory Volatility Adjustments Approach or the Own Estimates Approach as set out in Articles 224 and 225 respectively. Institutions shall scale up the volatility adjustments in accordance with Article 226.

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Article 235 Calculating risk-weighted exposure amounts under the Standardised Approach 1. For the purposes of Article 113(3) institutions shall calculate the risk-weighted exposure amounts in accordance with the following formula:max 0,E – GA · r + GA · rGA g where: E the exposure value in accordance with Article 111; for this purpose, the exposure value of an off-balance sheet item listed in Annex I shall be 100 % of its value rather than the exposure value indicated in Article 111(1); GA the amount of credit risk protection as calculated under Article 233(3) (G*) further adjusted for any maturity mismatch as laid down in Section 5; r the risk weight of exposures to the obligor as specified under Chapter 2; g the risk weight of exposures to the protection provider as specified under Chapter 2. 2. Where the protected amount (GA) is less than the exposure (E), institutions may apply the formula specified in paragraph 1 only where the protected and unprotected parts of the exposure are of equal seniority. 3. Institutions may extend the treatment set out in Article 114(4) and (7) to exposures or parts of exposures guaranteed by the central government or central bank, where the guarantee is denominated in the domestic currency of the borrower and the exposure is funded in that currency.

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Article 239 Valuation of protection 1. For transactions subject to funded credit protection under the Financial Collateral Simple Method, where there is a mismatch between the maturity of the exposure and the maturity of the protection, the collateral does not qualify as eligible funded credit protection. 2. For transactions subject to funded credit protection under the Financial Collateral Comprehensive Method, institutions shall reflect the maturity of the credit protection and of the exposure in the adjusted value of the collateral in accordance with the following formula:CVAM = CVA · formula:CVAMCVA t – t*T – t* where: CVA the volatility adjusted value of the collateral as specified in Article 223(2) or the amount of the exposure, whichever is lower; t the number of years remaining to the maturity date of the credit protection calculated in accordance with Article 238, or the value of T, whichever is lower; T the number of years remaining to the maturity date of the exposure calculated in accordance with Article 238, or five years, whichever is lower; t* 0,25. Institutions shall use CVAM as CVA further adjusted for maturity mismatch in the formula for the calculation of the fully adjusted value of the exposure (E*) set out in Article 223(5). 3. For transactions subject to unfunded credit protection, institutions shall reflect the maturity of the credit protection and of the exposure in the adjusted value of the credit protection in accordance with the following formula:GA = G* · formula:GAG* t – t*T – t* where: GA G* adjusted for any maturity mismatch; G* the amount of the protection adjusted for any currency mismatch; t is the number of years remaining to the maturity date of the credit protection calculated in accordance with Article 238, or the value of T, whichever is lower; T is the number of years remaining to the maturity date of the exposure calculated in accordance with Article 238, or five years, whichever is lower; t* 0,25. Institutions shall use GA as the value of the protection for the purposes of Articles 233 to 236.

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Article 250 Treatment of maturity mismatches in synthetic securitisations For the purposes of calculating risk-weighted exposure amounts in accordance with Article 249, any maturity mismatch between the credit protection which constitutes a tranche and by which the transfer of risk is achieved and the securitised exposures shall be taken into consideration as follows: (a) the maturity of the securitised exposures shall be taken to be the longest maturity of any of those exposures subject to a maximum of five years. The maturity of the credit protection shall be determined in accordance with Chapter 4; (b) an originator institution shall ignore any maturity mismatch in calculating risk-weighted exposure amounts for tranches appearing pursuant to this Section with a risk weighting of 1250 %. For all other tranches, the maturity mismatch treatment set out in Chapter 4 shall be applied in accordance with the following formula: RW* = RWSP · RW *RWSP t – t*T – t* + RWAss · t*RWAss T – tT – t* where: RW* risk-weighted exposure amounts for the purposes of Article 92(3)(a); RWAss risk-weighted exposure amounts for exposures if they had not been securitised, calculated on a pro-rata basis; RWSP risk-weighted exposure amounts calculated under Article 249 if there was no maturity mismatch; T maturity of the underlying exposures expressed in years; t maturity of credit protection. expressed in years; t* 0,25.

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Article 261 Ratings Based Method 1. Under the Ratings Based Method, the institution shall calculate the risk-weighted exposure amount of a rated securitisation or re-securitisation position by applying the relevant risk weight to the exposure value and multiplying the result by 1,06. The relevant risk weight shall be the risk weight as laid down in Table 4, with which the credit assessment of the position is associated in accordance with Section 4. Table 4 Credit Quality Step Securitisation Positions Re-securitisation Positions Credit assessments other than short term Short term credit assessments A B C D E 1 1 7 % 12 % 20 % 20 % 30 % 2 8 % 15 % 25 % 25 % 40 % 3 10 % 18 % 35 % 35 % 50 % 4 2 12 % 20 % 40 % 65 % 5 20 % 35 % 60 % 100 % 6 35 % 50 % 100 % 150 % 7 3 60 % 75 % 150 % 225 % 8 100 % 200 % 350 % 9 250 % 300 % 500 % 10 425 % 500 % 650 % 11 650 % 750 % 850 % all other and unrated 1250 % The weightings in column C of Table 4 shall be applied where the securitisation position is not a re-securitisation position and where the effective number of exposures securitised is less than six. For the remainder of the securitisation positions that are not re-securitisation positions, the weightings in column B shall be applied unless the position is in the most senior tranche of a securitisation, in which case the weightings in column A shall be applied. For re-securitisation positions the weightings in column E shall be applied unless the re-securitisation position is in the most senior tranche of the re-securitisation and none of the underlying exposures are themselves re-securitisation exposures, in which case column D shall be applied. When determining whether a tranche is the most senior, it is not required to take into consideration amounts due under interest rate or currency derivative contracts, fees due, or other similar payments. In calculating the effective number of exposures securitised multiple exposures to one obligor shall be treated as one exposure. The effective number of exposures is calculated as:N = ΣiEADi2ΣiEADi2 as:NiEADi2iEADi2 where EADi represents the sum of the exposure values of all exposures to the ith obligor. If the portfolio share associated with the largest exposure, C1, is available, the institution may compute N as 1/C1. 2. Credit risk mitigation on securitisation positions may be recognised in accordance with Article 264(1) and (4), subject to the conditions in Article 247.

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Article 262 Supervisory Formula Method 1. Under the Supervisory Formula Method, the risk weight for a securitisation position shall be calculated as follows subject to a floor of 20 % for re-securitisation positions and 7 % for all other securitisation positions:12.5 · SL + T – SLT where: S[x] = x, when x ≤ KIRBR KIRBR + Kx – KKIRBR + 1 – KKIRBR1 expω · KIRBR – xKIRBR · d · KIRBRω, when x > KIRBR where:h = where:h1 KIRBRELGDNcKIRBR1 hvELGD KIRBR KIRBR0,25 1 – KIRBRELGDNc = KIRBR1 – hv = ELGD – KIRBRNfv KIRBR21 h c21 KIRBR · KIRBR + 0,25 · ν1 h τg1 c cf 1ag cbg 1 – ELGD · KIRBRNf = v + KIRBR21 – cd1 1 h – c2 + 1 – KIRBR · KIRBR – ν1 – BetaKIRBR; a , bKx1 h · τg = 1 – c · cf – 1a = g · cb = g · 1 – cd = 1 – 1 – h · 1 – BetaKIRBR; a,bKx = 1 – h · 1 – Betax; a, Betax ; a , b · x + Betax; xBetax ; a + 1, b · c τ 1000; ω 20; Beta [x; a, b] the cumulative beta distribution with parameters a and b evaluated at x; T the thickness of the tranche in which the position is held, measured as the ratio of (a) the nominal amount of the tranche to (b) the sum of the nominal amounts of the exposures that have been securitised. For derivative instruments listed in Annex II, the sum of the current replacement cost and the potential future credit exposure calculated in accordance with Chapter 6 shall be used in place of the nominal amount; KIRBR the ratio of (a) KIRB to (b) the sum of the exposure values of the exposures that have been securitised, and is expressed in decimal form; L the credit enhancement level, measured as the ratio of the nominal amount of all tranches subordinate to the tranche in which the position is held to the sum of the nominal amounts of the exposures that have been securitised. Capitalised future income shall not be included in the measured L. Amounts due by counterparties to derivative instruments listed in Annex II that represent tranches more junior than the tranche in question may be measured at their current replacement cost, without the potential future credit exposures, in calculating the enhancement level; N the effective number of exposures calculated in accordance with Article 261. In the case of re-securitisations, the institution shall look at the number of securitisation exposures in the pool and not the number of underlying exposures in the original pools from which the underlying securitisation exposures stem; ELGD the exposure-weighted average loss-given-default, calculated as follows:ELGD = ΣiLGDi · EADiΣiEADi follows:ELGDiLGDi EADiiEADi where: LGDi the average LGD associated with all exposures to the ith obligor, where LGD is determined in accordance with Chapter 3. In the case of re-securitisation, an LGD of 100 % shall be applied to the securitised positions. When default and dilution risk for purchased receivables are treated in an aggregate manner within a securitisation, the LGDi input shall be constructed as a weighted average of the LGD for credit risk and the 75 % LGD for dilution risk. The weights shall be the stand-alone own funds charges for credit risk and dilution risk respectively. 2. Where the nominal amount of the largest securitised exposure, C1, is no more than 3 % of the sum of the nominal amount of the securitised exposures, then, for the purposes of the Supervisory Formula Method, the institution may set LGD= 50 % in the case of securitisations, which are not re-securitisations, and N equal to either of the following:N = C1 · Cm + Cm – following:NC1 CmCm C1m – 1 · max1 – m · C1,0–1N = 1C1 C1,01N1C1 where: Cm the ratio of the sum of the nominal amounts of the largest m exposures to the sum of the nominal amounts of the exposures securitised. The level of m may be set by the institution. For securitisations in which materially all securitised exposures are retail exposures, institutions may, subject to permission by the competent authority, use the Supervisory Formula Method using the simplifications h=0 and v=0, provided that the effective number of exposures is not low and that the exposures are not highly concentrated. 3. The competent authorities shall keep EBA informed about the use institutions make of paragraph 2. EBA shall monitor the range of practices in this area and shall, in accordance with Article 16 of Regulation (EU) No 1093/2010, issue guidelines. 4. Credit risk mitigation on securitisation positions may be recognised in accordance with Article 264(2) to (4), subject to the conditions in Article 247.

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Article 276 Standardised Method 1. Institutions may use the Standardised Method (hereinafter referred to as SM) only for calculating the exposure value for OTC derivatives and long settlement transactions. 2. When applying the SM, institutions shall calculate the exposure value separately for each netting set, net of collateral, as follows:Exposure value = β · valueβ max CMV – CMC, ΣjΣiRPTij – ΣlRPClj · CMC ,jiRPTij lRPClj CCRMj where: CMV current market value of the portfolio of transactions within the netting set with a counterparty gross of collateral, where:CMV = ΣiCMVi where:CMViCMVi where: CMVi the current market value of transaction i; CMC the current market value of the collateral assigned to the netting set, where:CMC = ΣlCMCl where:CMClCMCl where: CMCl the current market value of collateral l; i index designating transaction; l index designating collateral; j index designating hedging set category; The hedging sets for this purpose correspond to risk factors for which risk positions of opposite sign can be offset to yield a net risk position on which the exposure measure is then based. RPTij risk position from transaction i with respect to hedging set j; RPClj risk position from collateral l with respect to hedging set j; CCRMj CCR Multiplier set out in Table 5 with respect to hedging set j; β 1,4. 3. For the purposes of the calculation under paragraph 2: (a) eligible collateral received from a counterparty shall have a positive sign and collateral posted to a counterparty shall have a negative sign; (b) only collateral that is eligible under Article 197, Article 198 and Article 299(2)(d) shall be used for the SM; (c) an institution may disregard the interest rate risk from payment legs with a remaining maturity of less than one year; (d) an institution may treat transactions that consist of two payment legs that are denominated in the same currency as a single aggregate transaction. The treatment for payment legs applies to the aggregate transaction.

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Article 280 Calculation of risk positions 1. An institution shall determine the size and sign of a risk position as follows: (a) for all instruments other than debt instruments: (i) as the effective notional value in the case of a transaction with a linear risk profile; (ii) as the delta equivalent notional value, pref · ∂V∂p, in the case of a transaction with a non-linear risk profile, where: Pref price of the underlying instrument, expressed in the reference currency; V value of the financial instrument (in the case of an option, the value is the option price); p price of the underlying instrument, expressed in the same currency as V; (b) for debt instruments and the payment legs of all transactions: (i) as the effective notional value multiplied by the modified duration in the case of a transaction with a linear risk profile; (ii) as the delta equivalent in notional value multiplied by the modified duration, ∂V∂r, in the case of a transaction with a non-linear risk profile, where: V value of the financial instrument (in the case of an option this is the option price); r interest rate level. If V is denominated in a currency other than the reference currency, the derivative shall be converted into the reference currency by multiplication with the relevant exchange rate. 2. Institutions shall group the risk positions into hedging sets. The absolute value amount of the sum of the resulting risk positions shall be calculated for each hedging set. The net risk position shall be the result of that calculation and shall be calculated for the purposes of Article 276(2) as follows:ΣiRPTij – ΣlRPClj follows:iRPTij lRPClj

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Article 284 Exposure value 1. Where an institution is permitted, in accordance with Article 283(1), to use the IMM to calculate the exposure value of some or all transactions mentioned in that paragraph, it shall measure the exposure value of those transactions at the level of the netting set. The model used by the institution for that purpose shall: (a) specify the forecasting distribution for changes in the market value of the netting set attributable to joint changes in relevant market variables, such as interest rates, foreign exchange rates; (b) calculate the exposure value for the netting set at each of the future dates on the basis of the joint changes in the market variables. 2. In order for the model to capture the effects of margining, the model of the collateral value shall meet the quantitative, qualitative and data requirements for the IMM in accordance with this Section and the institution may include in its forecasting distributions for changes in the market value of the netting set only eligible financial collateral as referred to in Articles 197 and 198 and points (c) and (d) of Article 299(2). 3. The own funds requirement for counterparty credit risk with respect to the CCR exposures to which an institution applies the IMM, shall be the higher of the following: (a) the own funds requirement for those exposures calculated on the basis of Effective EPE using current market data; (b) the own funds requirement for those exposures calculated on the basis of Effective EPE using a single consistent stress calibration for all CCR exposures to which they apply the IMM. 4. Except for counterparties identified as having Specific Wrong-Way risk that fall within the scope of Article 291(4) and (5), institutions shall calculate the exposure value as the product of alpha (α) times Effective EPE, as follows: Exposure value = α · Effective EPE where: α 1.4, unless competent authorities require a higher α or permit institutions to use their own estimates in accordance with paragraph 9; Effective EPE shall be calculated by estimating expected exposure (EEt) as the average exposure at future date t, where the average is taken across possible future values of relevant market risk factors. The model shall estimate EE at a series of future dates t1, t2, t3, etc. 5. Effective EE shall be calculated recursively as:Effective EEtkmax Effective EEtk = max Effective EEtk–1, 1, EEtk where: the current date is denoted as t0; Effective EEt0 equals current exposure. 6. Effective EPE is the average Effective EE during the first year of future exposure. If all contracts in the netting set mature within less than one year, EPE shall be the average of EE until all contracts in the netting set mature. Effective EPE shall be calculated as a weighted average of Effective EE:Effective EPE = Σk=1min EPEmin 1 year, maturity maturityk1 Effective EEtk · Δtk Δ tk where the weights Δtk = tk – tk–1 tk 1 allow for the case when future exposure is calculated at dates that are not equally spaced over time. 7. Institutions shall calculate EE or peak exposure measures on the basis of a distribution of exposures that accounts for the possible non-normality of the distribution of exposures. 8. An institution may use a measure of the distribution calculated by the IMM that is more conservative than α multiplied by Effective EPE as calculated in accordance with the equation in paragraph 4 for every counterparty. 9. Notwithstanding paragraph 4, competent authorities may permit institutions to use their own estimates of alpha, where: (a) alpha shall equal the ratio of internal capital from a full simulation of CCR exposure across counterparties (numerator) and internal capital based on EPE (denominator); (b) in the denominator, EPE shall be used as if it were a fixed outstanding amount. When estimated in accordance with this paragraph, alpha shall be no lower than 1,2. 10. For the purposes of an estimate of alpha under paragraph 9, an institution shall ensure that the numerator and denominator are calculated in a manner consistent with the modelling methodology, parameter specifications and portfolio composition. The approach used to estimate α shall be based on the institution's internal capital approach, be well documented and be subject to independent validation. In addition, an institution shall review its estimates of alpha on at least a quarterly basis, and more frequently when the composition of the portfolio varies over time. An institution shall also assess the model risk. 11. An institution shall demonstrate to the satisfaction of the competent authorities that its internal estimates of alpha capture in the numerator material sources of dependency of distribution of market values of transactions or of portfolios of transactions across counterparties. Internal estimates of alpha shall take account of the granularity of portfolios. 12. In supervising the use of estimates under paragraph 9, competent authorities shall have regard to the significant variation in estimates of alpha that arises from the potential for mis-specification in the models used for the numerator, especially where convexity is present. 13. Where appropriate, volatilities and correlations of market risk factors used in the joint modelling of market and credit risk shall be conditioned on the credit risk factor to reflect potential increases in volatility or correlation in an economic downturn.

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Article 298 Effects of recognition of netting as risk-reducing 1. The following treatment applies to contractual netting agreements: (a) netting for the purposes of Sections 5 and 6 shall be recognised as set out in those Sections; (b) in the case of contracts for novation, the single net amounts fixed by such contracts rather than the gross amounts involved, may be weighted. In the application of Section 3, institutions may take the contract for novation into account when determining: (i) the current replacement cost referred to in Article 274(1); (ii) the notional principal amounts or underlying values referred to in Article 274(2). In the application of Section 4, in determining the notional amount referred to in Article 275(1) institutions may take into account the contract for novation for the purposes of calculating the notional principal amount In such cases, institutions shall apply the percentages of Table 3. (c) In the case of other netting agreements, institutions shall apply Section 3 as follows: (i) the current replacement cost referred to in Article 274(1) for the contracts included in a netting agreement shall be obtained by taking account of the actual hypothetical net replacement cost which results from the agreement; in the case where netting leads to a net obligation for the institution calculating the net replacement cost, the current replacement cost is calculated as 0; (ii) the figure for potential future credit exposure referred to in Article 274(2) for all contracts included in a netting agreement shall be reduced in accordance with the following formula: PCEred = 0.4 · PCEgross + 0.6 · PCEred0.4 PCEgross0.6 NGR · PCEgross where: PCEred the reduced figure for potential future credit exposure for all contracts with a given counterparty included in a legally valid bilateral netting agreement; PCEgross the sum of the figures for potential future credit exposure for all contracts with a given counterparty which are included in a legally valid bilateral netting agreement and are calculated by multiplying their notional principal amounts by the percentages set out in Table 1; NGR the net-to-gross ratio calculated as the quotient of the net replacement cost for all contracts included in a legally valid bilateral netting agreement with a given counterparty (numerator) and the gross replacement cost for all contracts included in a legally valid bilateral netting agreement with that counterparty (denominator). 2. When carrying out the calculation of the potential future credit exposure in accordance with the formula set out in paragraph 1, institutions may treat perfectly matching contracts included in the netting agreement as if they were a single contract with a notional principal equivalent to the net receipts. In the application of Article 275(1) institutions may treat perfectly matching contracts included in the netting agreement as if they were a single contract with a notional principal equivalent to the net receipts, and the notional principal amounts shall be multiplied by the percentages given in Table 3. For the purposes of this paragraph, perfectly matching contracts are forward foreign-exchange contracts or similar contracts in which a notional principal is equivalent to cash flows if the cash flows fall due on the same value date and fully in the same currency. 3. For all other contracts included in a netting agreement, the percentages applicable may be reduced as indicated in Table 6: Table 6 Original maturity Interest-rate contracts Foreign-exchange contracts One year or less 0,35 % 1,50 % More than one year but not more than two years 0,75 % 3,75 % Additional allowance for each additional year 0,75 % 2,25 % 4. In the case of interest-rate contracts, institutions may, subject to the consent of their competent authorities, choose either original or residual maturity.

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Article 308 Own funds requirements for pre-funded contributions to the default fund of a QCCP 1. The exposure value for an institution's pre-funded contribution to the default fund of a QCCP (DFi) shall be the amount paid in or the market value of the assets delivered by that institution reduced by any amount of that contribution that the QCCP has already used to absorb its losses following the default of one or more of its clearing members. 2. An institution shall calculate the own funds requirement (Ki) to cover the exposure arising from its pre-funded contribution (DFi) as follows:Ki = 1 + β · follows:Ki1β NN – 2 · DFiDFCM · KCM where: β the concentration factor communicated to the institution by the CCP; N the number of clearing members communicated to the institution by the CCP; DFCM the sum of pre-funded contributions of all clearing members of the CCP ΣiDFicommunicated iDFicommunicated to the institution by the CCP; KCM the sum of the own funds requirements of all clearing members of the CCP calculated in accordance with the applicable formula specified in paragraph 3 ΣiKi. iKi. 3. An institution shall calculate KCM as follows: (a) where KCCP ≤ DFCCP, the institution shall use the following formula: KCM = c1 · KCMc1 DFCM*; (b) where DFCCP < KCCP ≤DF*, the institution shall use the following formula: KCM = c2 · KCMc2 KCCP – DFCCP + c1 · DF* – DFCCPc1 DF * KCCP; (c) where DF* < KCCP, the institution shall use the following formula: KCM = c2 · KCMc2 μ · KCCP – DF* + c2 · DF *c2 DFCM* where: DFCCP the pre-funded financial resources of the CCP communicated to the institution by the CCP; KCCP the hypothetical capital of the CCP communicated to the institution by the CCP; DF* DFCCP + DFCM*; DFCM* DFCM – 2 · DF—i;; DFi;; DFi the average pre-funded contribution, 1N · DFCM, communicated to the institution by the CCP; c1 a capital factor equal to max 1.6 %DF*KCCP0.3, %DF *KCCP0.3, 0.16% c2 a capital factor equal to 100 %; μ 1,2. 4. An institution shall calculate the risk-weighted exposure amounts for exposures arising from an institution's pre-funded contribution for the purposes of Article 92(3) as the own funds requirement (Ki) determined in accordance with paragraph 2 multiplied by 12,5. 5. Where KCCP is equal to zero, institutions shall use the value for c1 of 0,16 % for the purpose of the calculation in paragraph 3.

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Article 309 Own funds requirements for pre-funded contributions to the default fund of a non-qualifying CCP and for unfunded contributions to a non-qualifying CCP 1. An institution shall apply the following formula to calculate the own funds requirement (Ki) for the exposures arising from its pre-funded contributions to the default fund of a non-qualifying CCP (DFi) and from unfunded contributions (UCi) to such CCP:Ki = c2 · CCP:Kic2 μ · DFi + UCi where c2·and μ are defined as in Article 308(3). 2. For the purpose of paragraph 1, unfunded contributions means contributions that an institution acting as a clearing member has contractually committed to provide to a CCP after the CCP has depleted its default fund to cover the losses it incurred following the default of one or more of its clearing members. 3. An institution shall calculate the risk-weighted exposure amounts for exposures arising from an institution's pre-funded contribution for the purposes of Article 92(3) as the own funds requirement (Ki) determined in accordance with paragraph 1 multiplied by 12,5.

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Article 310 Alternative calculation of own funds requirement for exposures to a QCCP An institution shall apply the following formula to calculate the own funds requirement (Ki) for the exposures arising from its trade exposures and the trade exposures of its clients (TEi) and pre-funded contributions (DFi) to the default fund of a QCCP:Ki = 8% · QCCP:Ki8% min2% · TEi1250% DFi;20% TEi + 1250% · DFi;20% · TEi

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Article 340 Duration-based calculation of general risk 1. Institutions may use an approach for calculating the own funds requirement for the general risk on debt instruments which reflects duration, instead of the approach set out in Article 339, provided that the institution does so on a consistent basis. 2. Under the duration-based approach referred to in paragraph 1, the institution shall take the market value of each fixed-rate debt instrument and hence calculate its yield to maturity, which is implied discount rate for that instrument. In the case of floating-rate instruments, the institution shall take the market value of each instrument and hence calculate its yield on the assumption that the principal is due when the interest rate can next be changed. 3. The institution shall then calculate the modified duration of each debt instrument on the basis of the following formula:modified duration = D1 + durationD1 R where: D duration calculated according to the following formula:D = Σt=1Mt · formula:DMt1t Ct1 + RtΣt=1MCt1 + RtMt1Ct1 Rt where: R yield to maturity; Ct cash payment in time t; M total maturity. Correction shall be made to the calculation of the modified duration for debt instruments which are subject to prepayment risk. EBA shall, in accordance with Article 16 of Regulation (EU) No 1093/2010, issue guidelines about how to apply such corrections. 4. The institution shall then allocate each debt instrument to the appropriate zone in Table 3. It shall do so on the basis of the modified duration of each instrument. Table 3 Zone Modified duration (in years) Assumed interest (change in %) One > 0 ≤ 1,0 1,0 Two > 1,0 ≤ 3,6 0,85 Three > 3,6 0,7 5. The institution shall then calculate the duration-weighted position for each instrument by multiplying its market price by its modified duration and by the assumed interest-rate change for an instrument with that particular modified duration (see column 3 in Table 3). 6. The institution shall calculate its duration-weighted long and its duration-weighted short positions within each zone. The amount of the former which are matched by the latter within each zone shall be the matched duration-weighted position for that zone. The institution shall then calculate the unmatched duration-weighted positions for each zone. It shall then follow the procedures laid down for unmatched weighted positions in Article 339(5) to (8). 7. The institution's own funds requirement shall then be calculated as the sum of the following: (a) 2 % of the matched duration-weighted position for each zone; (b) 40 % of the matched duration-weighted positions between zones one and two and between zones two and three; (c) 150 % of the matched duration-weighted position between zones one and three; (d) 100 % of the residual unmatched duration-weighted positions.

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Article 383 Advanced method 1. An institution which has permission to use an internal model for the specific risk of debt instruments in accordance with point (d) of Article 363 (1) shall, for all transactions for which it has permission to use the IMM for determining the exposure value for the associated counterparty credit risk exposure in accordance with Article 283, determine the own funds requirements for CVA risk by modelling the impact of changes in the counterparties' credit spreads on the CVAs of all counterparties of those transactions, taking into account CVA hedges that are eligible in accordance with Article 386. An institution shall use its internal model for determining the own funds requirements for the specific risk associated with traded debt positions and shall apply a 99 % confidence interval and a 10-day equivalent holding period. The internal model shall be used in such way that it simulates changes in the credit spreads of counterparties, but does not model the sensitivity of CVA to changes in other market factors, including changes in the value of the reference asset, commodity, currency or interest rate of a derivative. The own funds requirements for CVA risk for each counterparty shall be calculated in accordance with the following formula:CVA = LGDMKT · Σi=1T formula:CVALGDMKT Ti1 max 0,exp– si – 0,expsi 1 · ti – 1LGDMKT – exp– si · expsi tiLGDMKT · EEi – 1 · Di – 1 + EEi · Di2 where: ti the time of the i-th revaluation, starting from t0=0; tT the longest contractual maturity across the netting sets with the counterparty; si is the credit spread of the counterparty at tenor ti, used to calculate the CVA of the counterparty. Where the credit default swap spread of the counterparty is available, an institution shall use that spread. Where such a credit default swap spread is not available, an institution shall use a proxy spread that is appropriate having regard to the rating, industry and region of the counterparty; LGDMKT the LGD of the counterparty that shall be based on the spread of a market instrument of the counterparty if a counterparty instrument is available. Where a counterparty instrument is not available, it shall be based on the proxy spread that is appropriate having regard to the rating, industry and region of the counterparty. The first factor within the sum represents an approximation of the market implied marginal probability of a default occurring between times ti-1 and ti; EEi the expected exposure to the counterparty at revaluation time ti, where exposures of different netting sets for such counterparty are added, and where the longest maturity of each netting set is given by the longest contractual maturity inside the netting set; An institution shall apply the treatment set out in paragraph 3 in the case of margined trading, if the institution uses the EPE measure referred to in point (a) or (b) of Article 285(1) for margined trades; Di the default risk-free discount factor at time ti, where D0 =1. 2. When calculating the own funds requirements for CVA risk for a counterparty, an institution shall base all inputs into its internal model for specific risk of debt instruments on the following formulae (whichever is appropriate): (a) where the model is based on full repricing, the formula in paragraph 1 shall be used directly; (b) where the model is based on credit spread sensitivities for specific tenors, an institution shall base each credit spread sensitivity ('Regulatory CS01') on the following formula: Regulatory CS01i = 0.0001 · CS01i0.0001 ti · exp– si · expsi tiLGDMKT · EEi – 1 · Di – 1 – EEi + 1 · Di + 12 For the final time bucket i=T, the corresponding formula is Regulatory CS01T = 0.0001 · CS01T0.0001 tT · exp– sT · expsT tTLGDMKT · EET – 1 · DT – 1 + EET · DT2 (c) where the model uses credit spread sensitivities to parallel shifts in credit spreads, an institution shall use the following formula: Regulatory CS01 = 0.0001 · Σi=1Tti · exp– si · CS010.0001 Ti1ti expsi tiLGDMKT – ti – 1 · exp– si – expsi 1 · ti – 1LGDMKT · EEi – 1 · Di – 1 + EEi · 1EEi Di2 (d) where the model uses second-order sensitivities to shifts in credit spreads (spread gamma), the gammas shall be calculated based on the formula in paragraph 1. 3. An institution using the EPE measure for collateralised OTC derivatives referred to in point (a) … 679 unchanged words … draft regulatory technical standards to the Commission by 1 January 2014. Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.

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Article 384 Standardised method 1. An institution which does not calculate the own funds requirements for CVA risk for its counterparties in accordance with Article 383 shall calculate a portfolio own funds requirements for CVA risk for each counterparty in accordance with the following formula, taking into account CVA hedges that are eligible in accordance with Article 386:K = 2.33 · 386:K2.33 h · Σi i 0.5 · wi · Mi · EADitotal – MihedgeBi – Σind ind wind · Mind · Bind2 + Σi i 0.75 · wi2 · Mi · EADitotal – MihedgeBi2 where: h the one-year risk horizon (in units of a year); h = 1; wi the weight applicable to counterparty i. Counterparty i shall be mapped to one of the six weights wi based on an external credit assessment by a nominated ECAI, as set out in Table 1. For a counterparty for which a credit assessment by a nominated ECAI is not available: (a) an institution using the approach in Title II, Chapter 3 shall map the internal rating of the counterparty to one of the external credit assessment; (b) an institution using the approach in Title II, Chapter 2 shall assign wi=1,0 % to this counterparty. However, if an institution uses Article 128 to risk weight counterparty credit risk exposures to this counterparty, wi=3,0 % shall be assigned; EADitotal the total counterparty credit risk exposure value of counterparty i (summed across its netting sets) including the effect of collateral in accordance with the methods set out in Sections 3 to 6 of Title II, Chapter 6 as applicable to the calculation of the own funds requirements for counterparty credit risk for that counterparty. An institution using one of the methods set out in Sections 3 and 4 of Title II, Chapter 6, may use as the fully adjusted exposure value in accordance with Article 223(5). For an institution not using the method set out in Section 6 of Title II, Chapter 6, the exposure shall be discounted by applying the following factor:1 – e–0.05 · e0.05 Mi0.05 · Mi Bi the notional of purchased single name credit default swap hedges (summed if more than one position) referencing counterparty i and used to hedge CVA risk. That notional amount shall be discounted by applying the following factor:1 – e–0.05 · Mi0.05 · Mi e0.05 Mihedge0.05 Mihedge Bind is the full notional of one or more index credit default swap of purchased protection used to hedge CVA risk. That notional amount shall be discounted by applying the following factor:1 – e–0.05 · Mi0.05 · Mi e0.05 Miind0.05 Miind wind is the weight applicable to index hedges. An institution shall determine wind by calculating a weighted average of wi that are applicable to the individual constituents of the index; Mi the effective maturity of the transactions with counterparty i. For an institution using the method set out in Section 6 of Title II, Chapter 6, Mi shall be calculated in accordance with Article 162(2)(g). However, for that purpose, Mi shall not be capped at five years but at the longest contractual remaining maturity in the netting set. For an institution not using the method set out in Section 6 of Title II, Chapter 6, Mi is the average notional weighted maturity as referred to in point (b) of Article 162(2). However, for that purpose, Mi shall not be capped at five years but at the longest contractual remaining maturity in the netting set. Mihedge the maturity of the hedge instrument with notional Bi (the quantities MihedgeBi are to be summed if these are several positions); Mind the maturity of the index hedge. In the case of more than one index hedge position, Mind is the notional-weighted maturity. 2. Where a counterparty is included in an index on which a credit default swap used for hedging counterparty credit risk is based, the institution may subtract the notional amount attributable to that counterparty in accordance with its reference entity weight from the index CDS notional amount and treat it as a single name hedge (Bi) of the individual counterparty with maturity based on the maturity of the index. Table 1 Credit quality step Weight wi 1 0,7 % 2 0,8 % 3 1,0 % 4 2,0 % 5 3,0 % 6 10,0 %

texts differ too much for an inline diff; shown separately

before (02013R0575-20130628)

Article 429
Calculation of the leverage ratio
1.
Institutions shall calculate their leverage ratio in accordance with the methodology set out in paragraphs 2 to 11.

2.
The leverage ratio shall be calculated as an institution's capital measure divided by that institution's total exposure measure and shall be expressed as a percentage.
Institutions shall calculate the leverage ratio as the simple arithmetic mean of the monthly leverage ratios over a quarter.
3.
For the purposes of paragraph 2, the capital measure shall be the Tier 1 capital.
4.
The total exposure measure is the sum of the exposure values of all assets and off-balance sheet items not deducted when determining the capital measure referred to in paragraph 3.
Where institutions include a financial sector entity in which they hold a significant investment in accordance with Article 43 in their consolidation according to the applicable accounting framework, but not in their prudential consolidation in accordance with Chapter 2 of Title II of Part One, they shall determine the exposure value for the significant investment not in accordance with point (a) of paragraph 5 of this Article but as the amount that is obtained by multiplying the amount defined in point (a) of this subparagraph with the factor defined in point (b) of this subparagraph:

(a) the sum of the exposure values of all exposures of the financial sector entity in which the significant investment is held;

(b) for all direct, indirect and synthetic holdings of the institution of the Common Equity Tier 1 instruments of the financial sector entity, the total amount of such items not deducted pursuant to Article 47 and point (b) of Article 48(1) divided by the total amount of such items.
5.
Institutions shall determine the exposure value of assets in accordance with the following principles:

(a) the exposure values of assets excluding contracts listed in Annex II and credit derivatives, means exposure values in accordance with the first sentence of Article 111(1);

(b) physical or financial collateral, guarantees or credit risk mitigation purchased shall not be used to reduce exposure values of assets;

(c) loans shall not be netted with deposits.
6.
Institutions shall determine the exposure value of contracts listed in Annex II and of credit derivatives including those that are off-balance sheet, in accordance with the method set out in Article 274.
In determining the exposure value of contracts listed in Annex II and of credit derivatives, institutions shall take into account the effects of contracts for novation and other netting agreements, except contractual cross-product netting agreements, in accordance with Article 295.

7.
By way of derogation from paragraph 6, institutions may use the method set out in Article 275 to determine the exposure value of contracts listed in points 1 and 2 of Annex II only where they also use that method for determining the exposure value of those contracts for the purposes of meeting the own funds requirements set out in Article 92.
8.
When determining the potential future credit exposure of credit derivatives, institutions shall apply the principles laid down in Article 299(2) to all their credit derivatives, not just those assigned to the trading book.
9.
Institutions shall determine the exposure value of repurchase transactions, securities or commodities lending or borrowing transactions, long settlement transactions and margin lending transactions including those that are off-balance sheet, in accordance with Article 220(1) to (3) and Article 222, and shall take into account the effects of master netting agreements, except contractual cross-product netting agreements, in accordance with Article 206.
10.
Institutions shall determine the exposure value of off-balance sheet items, except the items referred to in paragraphs 6 and 9 of this Article, in accordance with Article 111(1), subject to the following amendments to the conversion factors listed in that Article:

(a) the conversion factor to be applied to the nominal value for undrawn credit facilities, which may be cancelled unconditionally at any time without notice, referred to in points 4(a) and (b) of Annex I, is 10 %;

(b) the conversion factor for medium/low risk trade finance related off-balance sheet items referred to in point 3(a) of Annex I and to officially supported export credits related off-balance sheet items referred to in point 3(b)(i) of Annex I is 20 %;

(c) the conversion factor for medium risk trade finance related off-balance sheet items referred to in points 2(a) and 2(b)(i) of Annex I and to officially supported export credits related off-balance sheet items referred to in point 2(b)(ii) of Annex I is 50 %;

(d) the conversion factor for all other off-balance sheet items listed in Annex I is 100 %.
11.
Where national generally accepted accounting principles recognises fiduciary assets on balance sheet, in accordance with Article 10 of Directive 86/635/EEC, those assets may be excluded from the leverage ratio total exposure measure provided that they meet the criteria for non-recognition set out in International Accounting Standard (IAS) 39, as applicable under Regulation (EC) No 1606/2002, and, where applicable, the criteria for non-consolidation set out in International Financial Reporting Standard (IFRS) 10, as applicable under Regulation (EC) No 1606/2002.

after (02013R0575-20150118)

Article 429
Calculation of the leverage ratio
1. Institutions shall calculate their leverage ratio in accordance with the methodology set out in paragraphs 2 to 13.
2. The leverage ratio shall be calculated as an institution's capital measure divided by that institution's total exposure measure and shall be expressed as a percentage.
Institutions shall calculate the leverage ratio at the reporting reference date.
3. For the purposes of paragraph 2, the capital measure shall be the Tier 1 capital.
4. The total exposure measure shall be the sum of the exposure values of:
(a) assets referred to in paragraph 5 unless they are deducted when determining the capital measure referred to in paragraph 3;
(b) derivatives referred to in paragraph 9;
(c) add-ons for counterparty credit risk of repurchase transactions, securities or commodities lending or borrowing transactions, long settlement transactions and margin lending transactions including those that are off-balance sheet referred to in Article 429b;
(d) off-balance sheet items referred to in paragraph 10.
5. Institutions shall determine the exposure value of assets, excluding contracts listed in Annex II and credit derivatives, in accordance with the following principles:
(a) the exposure values of assets means exposure values in accordance with the first sentence of Article 111(1);
(b) physical or financial collateral, guarantees or credit risk mitigation purchased shall not be used to reduce exposure values of assets;
(c) loans shall not be netted with deposits;
(d) repurchase transactions, securities or commodities lending or borrowing transactions, long settlement transactions and margin lending transactions shall not be netted.
6. Institutions may deduct from the exposure measure set out in paragraph 4 of this Article the amounts deducted from Common equity Tier 1 capital in accordance with Article 36(1)(d).
7. Competent authorities may permit an institution not to include in the exposure measure exposures that can benefit from the treatment laid down in Article 113(6). Competent authorities may grant that permission only where all the conditions set out in points (a) to (e) of Article 113(6) are met and where they have given the approval laid down in Article 113(6).
8. By way of derogation from point (d) of paragraph 5, institutions may determine the exposure value of cash receivables and cash payables of repurchase transactions, securities or commodities lending or borrowing transactions, long settlement transactions and margin lending transactions with the same counterparty on a net basis only if all the following conditions are met:
(a) the transactions have the same explicit final settlement date;
(b) the right to set off the amount owed to the counterparty with the amount owed by the counterparty is legally enforceable in all the following situations:
(i) in the normal course of business;
(ii) in the event of default, insolvency and bankruptcy;
(c) the counterparties intend to settle net, settle simultaneously, or the transactions are subject to a settlement mechanism that results in the functional equivalent of net settlement.
For the purposes of point (c) of the first subparagraph, a settlement mechanism results in the functional equivalent of net settlement if, on the settlement date, the net result of the cash flows of the transactions under that mechanism is equal to the single net amount under net settlement.
9. Institutions shall determine the exposure value of contracts listed in Annex II and of credit derivatives including those that are off-balance sheet, in accordance with Article 429a.
10. Institutions shall determine the exposure value of off-balance-sheet items, excluding contracts listed in Annex II, credit derivatives, repurchase transactions, securities or commodities lending or borrowing transactions, long settlement transactions and margin lending transactions, in accordance with Article 111(1). However, institutions shall not reduce the nominal value of those items by specific credit risk adjustments.
In accordance with Article 166(9), where a commitment refers to the extension of another commitment, the lower of the two conversion factors associated with the individual commitment shall be used. The exposure value of low risk off- balance sheet items referred to in Article 111(1)(d) shall be subject to a floor equal to 10 % of their nominal value.
11. An institution that is a clearing member of a QCCP may exclude from the calculation of the exposure measure trade exposures of the following items, provided that those trade exposures are cleared with that QCCP and meet, at the same time, the conditions laid down in Article 306(1)(c):
(a) contracts listed in Annex II;
(b) credit derivatives;
(c) repurchase transactions;
(d) securities or commodities lending or borrowing transactions;
(e) long settlement transactions;
(f) margin lending transactions.
12. Where an institution that is a clearing member of a QCCP guarantees to the QCCP the performance of a client that enters directly into derivative transactions with the QCCP, it shall include in the exposure measure the exposure resulting from the guarantee as a derivative exposure to the client in accordance with Article 429a.
13. Where national generally accepted accounting principles recognise fiduciary assets on balance sheet, in accordance with Article 10 of Directive 86/635/EEC, those assets may be excluded from the leverage ratio total exposure measure provided that they meet the criteria for non-recognition set out in International Accounting Standard (IAS) 39, as applicable under Regulation (EC) No 1606/2002, and, where applicable, the criteria for non-consolidation set out in International Financial Reporting Standard (IFRS) 10, as applicable under Regulation (EC) No 1606/2002.
14. Competent authorities may permit an institution to exclude from the exposure measure exposures that meet all of the following conditions:
(a) they are exposures to a public sector entity;
(b) they are treated in accordance with Article 116(4);
(c) they arise from deposits that the institution is legally obliged to transfer to the public sector entity referred to in point (a) for the purposes of funding general interest investments.

inserted text (02013R0575-20150118)

Article 429a
Exposure value of derivatives
1. Institutions shall determine the exposure value of contracts listed in Annex II and of credit derivatives, including those that are off-balance sheet, in accordance with the method set out in Article 274. Institutions shall apply Article 299(2)(a) for the determination of the potential future credit exposure for credit derivatives.
When determining the potential future credit exposure of credit derivatives, institutions shall apply the principles laid down in Article 299(2)(a) to all their credit derivatives, not only those assigned to the trading book.
In determining the exposure value, institutions may take into account the effects of contracts for novation and other netting agreements in accordance with Article 295. Cross-product netting shall not apply. However, institutions may net within the product category referred to in point (25)(c) of Article 272 and credit derivatives when they are subject to a contractual cross-product netting agreement referred to in Article 295(c).
2. Where the provision of collateral related to derivatives contracts reduces the amount of assets under the applicable accounting framework, institutions shall reverse that reduction.
3. For the purposes of paragraph 1, institutions may deduct variation margin received in cash from the counterparty from the current replacement cost portion of the exposure value in so far as under the applicable accounting framework the variation margin has not already been recognised as a reduction of the exposure value and when all the following conditions are met:
(a) for trades not cleared through a QCCP, the cash received by the recipient counterparty is not segregated;
(b) the variation margin is calculated and exchanged on a daily basis based on mark-to-market valuation of derivatives positions;
(c) the variation margin received in cash is in the same currency as the currency of settlement of the derivative contract;
(d) the variation margin exchanged is the full amount that would be necessary to fully extinguish the mark-to-market exposure of the derivative subject to the threshold and minimum transfer amounts applicable to the counterparty;
(e) the derivative contract and the variation margin between the institution and the counterparty to that contract are covered by a single netting agreement that the institution may treat as risk-reducing in accordance with Article 295.
For the purposes of point (c) of the first subparagraph, where the derivative contract is subject to a qualifying master netting agreement, the currency of settlement means any currency of settlement specified in the derivative contract, the governing qualifying master netting agreement or the credit support annex to the qualifying master netting agreement.
Where under the applicable accounting framework an institution recognises the variation margin paid in cash to the counterparty as a receivable asset, it may exclude that asset from the exposure measure provided that the conditions in points (a) to (e) are met.
4. For the purposes of paragraph 3 the following shall apply:
(a) the deduction of variation margin received shall be limited to the positive current replacement cost portion of the exposure value;
(b) an institution shall not use variation margin received in cash to reduce the potential future credit exposure amount, including for the purposes of Article 298(1)(c)(ii);
5. In addition to the treatment laid down in paragraph 1, for written credit derivatives institutions shall include in the exposure value the effective notional amounts referenced by the written credit derivatives reduced by any negative fair value changes that have been incorporated in Tier 1 capital with respect to the written credit derivative. The resulting exposure value may be further reduced by the effective notional amount of a purchased credit derivative on the same reference name provided that all the following conditions are met:
(a) for single name credit derivatives, the credit derivatives purchased must be on a reference name which ranks pari passu with or is junior to the underlying reference obligation of the written credit derivative and a credit event on the senior reference asset would result in a credit event on the subordinated asset;
(b) where an institution purchases protection on a pool of reference names, the purchased protection may offset sold protection on a pool of reference names only if the pool of reference entities and the level of subordination in both transactions are identical;
(c) the remaining maturity of the credit derivative purchased is equal to or greater than the remaining maturity of the written credit derivative;
(d) in determining the additional exposure value for written credit derivatives, the notional amount of the purchased credit derivative is reduced by any positive fair value change that has been incorporated in Tier 1 capital with respect to the credit derivative purchased;
(e) for tranched products, the credit derivative purchased as protection is on a reference obligation which ranks equal to the underlying reference obligation of the written credit derivative.
Where the notional amount of a written credit derivative is not reduced by the notional amount of a purchased credit derivative, institutions may deduct the individual potential future exposure of that written credit derivative from the total potential future exposure determined according to paragraph 1 of this Article in conjunction with Article 274(2) or Article 299(2)(a) as applicable. In case that the potential future credit exposure shall be determined in conjunction with Article 298(1)(c)(ii), PCEgross may be reduced by the individual potential future exposure of written credit derivatives with no adjustment made to the NGR.
6. Institutions shall not reduce the written credit derivative effective notional amount where they buy credit protection through a total return swap and record the net payments received as net income, but do not record any offsetting deterioration in the value of the written credit derivative reflected in Tier 1 capital.
7. In case of purchased credit derivatives on a pool of reference entities, institutions may recognise a reduction according to paragraph 5 on written credit derivatives on individual reference names only if the protection purchased is economically equivalent to buying protection separately on each of the individual names in the pool. If an institution purchases a credit derivative on a pool of reference names, it may only recognise a reduction on a pool of written credit derivatives when the pool of reference entities and the level of subordination in both transactions are identical.
8. By way of derogation from paragraph 1 of this Article, institutions may use the method set out in Article 275 to determine the exposure value of contracts listed in points 1 and 2 of Annex II only where they also use that method for determining the exposure value of those contracts for the purposes of meeting the own funds requirements set out in Article 92.
When institutions apply the method set out in Article 275, they shall not reduce the exposure measure by the amount of variation margin received in cash.

inserted text (02013R0575-20150118)

Article 429b
Counterparty credit risk add-on for repurchase transactions, securities or commodities lending or borrowing transactions, long settlement transactions and margin lending transactions
1. In addition to the exposure value of repurchase transactions, securities or commodities lending or borrowing transactions, long settlement transactions and margin lending transactions including those that are off-balance sheet in accordance with Article 429(5), institutions shall include in the exposure measure an add-on for counterparty credit risk determined in accordance to paragraph 2 or 3 of this Article, as applicable.
2. For the purposes of paragraph 1, for transactions with a counterparty which are not subject to a master netting agreement that meets the conditions laid down in Article 206 the add-on (Ei*)shall be determined on a transaction-by-transaction basis in accordance with the following formula:E*imax0, EiCi
where:
Ei is the fair value of securities or cash lent to the counterparty under transaction i;
Ci is the fair value of cash or securities received from the counterparty under transaction i.
3. For the purposes of paragraph 1, for transactions with a counterparty that are subject to a master netting agreement that meets the conditions laid down in Article 206, the add-on for those transactions (Ei*) shall be determined on an agreement-by-agreement basis in accordance with the following formula:E*imax0, iEiiCi
where:
Ei is the fair value of securities or cash lent to the counterparty for the transactions subject to master netting agreement i;
Ci is the fair value of cash or securities received from the counterparty subject to master netting agreement i.
4. By way of derogation from paragraph 1 of this Article, institutions may use the method set out in Article 222, subject to a 20 % floor for the applicable risk weight, to determine the add on for repurchase transactions, securities or commodities lending or borrowing transactions, long settlement transactions and margin lending transactions including those that are off-balance sheet. Institutions may use this method only where they also use it for determining the exposure value of those transactions for the purpose of meeting the own funds requirements as set out in Article 92.
5. Where sale accounting is achieved for a repurchase transaction under its applicable accounting framework, the institution shall reverse all sales-related accounting entries.
6. Where an institution acts as an agent between two parties in repurchase transactions, securities or commodities lending or borrowing transactions, long settlement transactions and margin lending transactions including those that are off-balance sheet, the following apply:
(a) where the institution provides an indemnity or guarantee to a customer or counterparty limited to any difference between the value of the security or cash the customer has lent and the value of collateral the borrower has provided it shall only include in the exposure measure the add-on determined in accordance with paragraph 2 or 3, as applicable;
(b) where the institution does not provide an indemnity or guarantee to any of the involved parties, the transaction shall not be included in the exposure measure;
(c) where the institution is economically exposed to the underlying security or cash in the transaction beyond the exposure covered by the add-on, it shall include also in the exposure measure an exposure equal to the full amount of the security or cash.

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Article 497 Own funds requirements for exposures to CCPs 1. Until 15 months after the date of entry into force of the latest of the regulatory technical standards referred to in Articles 16, 25, 26, 29, 34, 41, 42, 44, 45, 47 and 49 of Regulation (EU) No 648/2012, or until a decision is made under Article 14 of that Regulation on the authorisation of the CCP, whichever is earlier, an institution may consider that CCP to be a QCCP, provided that the CCP was authorised in its Member State of establishment to provide clearing services in accordance with the national law of that Member State before all the regulatory technical standards in Articles 5, 8 to 11, 16, 18, 25, 26, 29, 34, 41, 42, 44, 45, 46, 47, 49, 56 and 81 of that Regulation have been adopted. 2. Until 15 months after the date of entry into force of the latest of the regulatory technical standards referred to in Articles 16, 26, 29, 34, 41, 42, 44, 45, 47 and 49 of Regulation (EU) No 648/2012, or until a decision is made under Article 25 of that Regulation on the recognition of the CCP established in a third country, whichever is earlier, an institution may consider that CCP to be a QCCP, 3. The Commission may adopt an implementing act under Article 5 of Regulation (EU) No 182/2011 extending the transitional provisions in paragraphs 1 and 2 of this Article by a further six months, in exceptional circumstances where it is necessary and proportionate to avoid disruption to international financial markets. 4. Until the deadlines defined in paragraphs 1 and 2, and extended under paragraph 3, as applicable, where a CCP neither has a default fund nor has in place a binding arrangement with its clearing members that allows it to use all or part of the initial margin received from its clearing members as if they were pre-funded contributions, an institution shall substitute the right formula for calculating the own funds requirement (Ki) in Article 308(2) with the following one:Ki = 1 + β · one:Ki1β NN – 2 · IMiIM · KCM where IMi the initial margin posted to the CCP by clearing member i IM the total amount of initial margin communicated to the institution by the CCP.

02013R0575-20130628 → 02013R0575-20150118

Article 520 Amendment of Regulation (EU) No 648/2012 Regulation (EU) No 648/2012 is amended as follows: (1) the following Chapter is added in Title IV: CHAPTER 4 Calculations and reporting for the purposes of Regulation (EU) No 575/2013 Article 50a Calculation of KCCP 1. For the purposes of Article 308 of Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firmsOJ L 176, 27.6.2013,p.1.;, 27.6.2013, p. 1.;, a CCP shall calculate KCCP as specified in paragraph 2 of this Article for all contracts and transactions it clears for all its clearing members falling within the coverage of the given default fund. 2. A CCP shall calculate the hypothetical capital (KCCP) as follows:KCCP = ΣimaxEBRMi – follows:KCCPimaxEBRMi IMi – DFi;0 · RW · captial ratio where: EBRMi exposure value before risk mitigation that is equal to the exposure value of the CCP to clearing member i arising from all the contracts and transactions with that clearing member, calculated without taking into account the collateral posted by … 533 unchanged words … 1 and not as initial margin; (h) when applying the Mark-to-Market Method as set out in Article 274 of Regulation (EU) No 575/2013, a CCP shall replace the formula in point (c)(ii) of Article 298(1) of that Regulation with the following: PCEred = 0.15 · PCEgross + 0.85 · PCEred0.15 PCEgross0.85 NGR · PCEgross where the numerator of NGR is calculated in accordance with Article 274(1) of that Regulation and just before the variation margin is actually exchanged at the end of the settlement period, and the denominator is gross replacement cost; (i) where a CCP cannot calculate the value of NGR as set out in point (c)(ii) of Article 298(1) of Regulation (EU) No 575/2013, it shall: (i) notify those of its clearing members which are institutions and their competent authorities about its inability to calculate NGR and the reasons why it is unable to carry out the calculation; (ii) for a period of three months, it may use a value of NGR of 0,3 to perform the calculation of PCEred specified in point (h) of this Article; (j) where, at the end of the period specified in point (ii) of point (i), the CCP would still be unable to calculate the value of NGR, it shall do the following: (i) stop calculating KCCP; (ii) notify those of its clearing members which are institutions and their competent authorities that it has stopped calculating KCCP; (k) for the purpose of calculating the potential future exposure for options and swaptions in accordance with the Mark-to-Market Method specified in Article 274 of Regulation (EU) No 575/2013, a CCP shall multiply the notional amount of the contract by the absolute value of the option's deltaδV/δpas deltaδV δpas set out in point (a) of Article 280(1) of that Regulation; (l) where a CCP has more than one default fund, it shall carry out the calculation laid down in Article 50a(2) for each default fund separately. Article 50c Reporting of information 1. For the … 400 unchanged words … has depleted its default fund, but before it calls on the contractually committed contributions of its clearing members, the CCP shall add the corresponding amount of those additional financial resources DFCCPato the total amount of pre-funded contributions (DF) as follows: DF = DFCCP + DFCM + DFCCPa. DFDFCCP DFCMDFCCPa. (c) a CCP shall calculate the concentration factor (β) in accordance with the following formula: β = PCEred,1 + PCEred,2ΣiPCEred,i βPCEred,1 PCEred,2iPCEred,i where: PCEred,i the reduced figure for potential future credit exposure for all contracts and transaction of a CCP with clearing member i; PCEred,1 the reduced figure for potential future credit exposure for all contracts and transaction of a CCP with the clearing member that has the largest PCEred value; PCEred,2 the reduced figure for potential future credit exposure for all contracts and transaction of a CCP with the clearing member that has the second largest PCEred value. (2) in Article 11(15), point (b) is deleted; (3) in Article 89, the following paragraph is inserted: 5a. Until 15 months after the date of entry into force of the latest of the regulatory technical standards referred to in Articles 16, 25, 26, 29, 34, 41, 42, 44, 45, 47 and 49, or until a decision is made under Article 14 on the authorisation of the CCP, whichever is earlier, that CCP shall apply the treatment specified in the third subparagraph of this paragraph. Until 15 months after the date of entry into force of the latest of the regulatory technical standards referred to in Articles 16, 26, 29, 34, 41, 42, 44, 45, 47 and 49, or until a decision is made under Article 25 on the recognition of the CCP, whichever is earlier, that CCP shall apply the treatment specified in the third subparagraph of this paragraph. Until the deadlines defined in the first two subparagraphs of this paragraph, and subject to the fourth subparagraph of this paragraph, where a CCP neither has a default fund nor has in place a binding arrangement with its clearing members that allows it to use all or part of the initial margin received from its clearing members as if they were pre-funded contributions, the information it is to report in accordance with Article 50c(1) shall include the total amount of initial margin it has received from its clearing members. The deadlines referred to in the first and second subparagraphs of this paragraph may be extended by six months in accordance with a Commission implementing act adopted pursuant to Article 497(3) of Regulation (EU) No 575/2013. .