Clarification on Add on measure of Securities Financing Transactions (SFT) from the delegated act of the regulation 575/2013 on leverage ratio.

Based on Article 429e  of the Regulation (EU) No 575/2013  (CRR), in addition to the exposure value of repurchase transactions, institutions shall include in the exposure measure an add-on for counterparty credit risk determined in accordance to paragraph 2 or 3 of  Article 429e, as applicable. The Bank calculates the exposure of Securities Financing Transactions (SFT) according to Article 223 of the regulation 575/2013 (Financial Collateral Comprehensive Method) . If for example, the Bank has a German government bond of fair value (FV) EUR 100.000 with maturity less than a year, and uses it as a collateral for a repurchase agreement with a maturity of less than a year, and receives EUR 50.000 in cash, then according to Article 223 CRR the exposure value of the SFT will be : FV=100.000 plus volatility adjustment of 0.354%* FV of 354 minus cash received of 50.000 i.e. total exposure of EUR 50.354 In addition, the add on according to article 429e, will be the FV minus cash received i.e. EUR 50.000 According to the Annex 2 -ITS on reporting for the LR instructions , the row 300 of template C 47.00 (LEVERAGE RATIO CALCULATION (LRCalc)) which is the Total Leverage Ratio exposure - using a transitional definition of Tier 1 capital, includes both the exposure value of the SFT and the add on amount. Hence, for the specific SFT, the total leverage exposure would include a total of EUR 100.354 (which is more than the FV of the bond) In addition, it should be noted that since the German Government bond is an on balance sheet exposure, credit risk is also calculated for capital requirements purposes.   Can you please confirm that this is the correct treatment?

The Bank follows the Financial Collateral Comprehensive method (Article 223 of CRR) for the calculation of the exposure value of the SFT. In addition all the repurchase agreements are under master netting agreements