Risk weight in CCP-related exposures, rules on 2% AND 4% risk weight

Article 305(2) of Regulation (EU) No 575/2013 lists the conditions that need to be met in order for an institution, which is a client, to be able to benefit from applying the treatment laid down in Article 306 of that Regulation to its trade exposures for CCP-related transactions with its clearing member. The institution may apply the treatment in Article 306 only if all those conditions are met. Article 305(3) of that Regulation covers the case in which the condition laid down in point (a) of Article 305(2) is not fully met (specifically there is no bankruptcy remoteness, and hence the institution is potentially exposed to losses, in the event of the joint default of the clearing member and another client), but the conditions in points (b) to (d) of Article 305(2) are fully met, except for point (c) to the extent that the legal opinion cannot conclude there is protection from losses with regard to the condition provided under point (a). In such case the institution may still benefit from the treatment laid down in Article 306, but must use a 4% risk weight instead of a 2% risk weight under point (a) of the first paragraph of that Article.   DISCLAIMER This question goes beyond matters of consistent and effective application of the regulatory framework. A Directorate General of the Commission (Directorate General for Financial Stability, Financial services and Capital Markets Union) has prepared the answer, albeit that only the Court of Justice of the European Union can provide definitive interpretations of EU legislation. This is an unofficial opinion of that Directorate General, which the European Banking Authority publishes on its behalf. The answers are not binding on the European Commission as an institution. You should be aware that the European Commission could adopt a position different from the one expressed in such Q&As, for instance in infringement proceedings or after a detailed examination of a specific case or on the basis of any new legal or factual elements that may have been brought to its attention.