EBA · 2013_662 Final Q&A

What value should be used by a CCP as the reduced potential future credit exposure for securities financing transactions to calculate the concentration factor (β)?

Name: What value should be used by a CCP as the reduced potential future credit exposure for securities financing transactions to calculate the concentration factor (β)?: EBA Q&A — EU Financial Regulatory Q&A
Creator: European Banking Authority
License: https://creativecommons.org/licenses/by/4.0/

Regulation: Regulation (EU) No 575/2013 (CRR)
Article: 520
Topic: Market infrastructures
Submitted by: Competent authority
Submitted: 2013-12-16
Answered: 2014-09-12
Answer provided by: ESAs (EBA, ESMA, EIOPA)

Browse ECB SSM Register → More Q&As on this regulation →

Question

What value should be used as the reduced potential future credit exposure for securities financing transactions to calculate the concentration factor (β) for the purpose of Article 50d(c) of Regulation (EU) No 648/2012 (introduced by Article 520 of Regulation (EU) No 575/2013 (CRR))?

Background

According to Article 50d(c) of Regulation (EU) No 648/2012 (introduced by Article 520 of CRR) a CCP shall calculate the concentration factor (β) in accordance with the following formula; β=(PCE(red,1) + PCE(red,2))/∑iPCE(red,i) where PCEred,i is the reduced figure for potential future credit exposure for all contracts and transactions of a CCP with clearing member i. CRR does not however set out the definition/the way of calculation of PCEred,i for securities financing transactions.

Answer

The potential future credit exposure for securities financing transactions should be calculated in accordance with the following formula: PCEred = E*He + C*(Hc+Hfx), where E, H and C are defined in Article 223 of Regulation (EU) No. 575/2013 (CRR). Article 50b(a)(ii) of Regulation (EU) No. 648/2012 (EMIR)(as amended by Article 520 of the CRR) clearly instructs the central counterparty to use this treatment for repurchase agreements.

Original source: European Banking Authority, Q&A ID 2013_662

This Q&A is published by European Banking Authority and is non-binding. It does not constitute legal advice. Updated weekly from official ESA sources.

Similar Q&As

Types of collateral to be taken into account in the calculation of hypothetical capital by a CCP in accordance with Article 223(5) of CRR

Answered 2014-10-24

Treatment of repurchase agreements and reverse repurchase agreement, as well as securities or commodities lending/borrowing of the banking book under standardised approach of credit risk.

Answered 2024-01-12

Basis of risk exposures to take in consderation for calculation of the countercyclical buffer (CcyB)

Answered 2017-04-21

Leased assets residual value under standardised method

Answered 2019-10-04

Own estimates of CCF in the retail exposure class

Answered 2017-05-05

More Q&As on this topic

Risk weight of exposures with QCCPs

Answered 2017-01-06

Initial margin for the purpose of hypothetical capital calculation

Answered 2015-08-21

Types of collateral to be taken into account in the calculation of hypothetical capital by a CCP in accordance with Article 223(5) of CRR

Answered 2014-10-24

Interaction between Qualified CCPs and Reporting

Answered 2014-09-26

Treatment of clients' exposures

Answered 2014-03-28

📋 Track EU financial regulation continuously

Forseti monitors EU financial regulation and delivers personalised alerts anchored to verified official sources.

Start free trial → Learn more

14-day free trial. No credit card required.