On-balance sheet netting and exemption from the Large Exposures limits - question 1

Loans and deposits which are subject to an on-balance sheet netting agreement recognised under Part Three, Title II, Chapter 4 are deemed to fall under Article 400(1)(g) of Regulation (EU) No 575/2013.  All provisions referring to on-balance sheet netting agreements under Part Three, Title II, Chapter 4 are relevant for the recognition of the exemption under Article 400(1)(g)of the CRR. The exception to the abovementioned article is that the exemption must fulfil the general requirements for the recognition of credit risk mitigation techniques under Part Three, Title II, Chapter 4 of the CRR. In particular, Articles 195 and 219 of the CRR limit on-balance sheet netting to reciprocal cash balances denominated in the same currency between an institution and its counterparty that are subject to an on-balance sheet netting agreement. This exception is without prejudice to the rights of set-off associated with other transactions subject to an enforceable master netting arrangement as specified in Article 196 of the CRR. On-balance sheet netting agreements, where both legs are denominated in different currencies are therefore not included in the exemption under Article 400 (1)(g) of the CRR. See also Q&A 2014_1508 .