EBA · 2017_3169 Final Q&A

Effective Maturity calculation for fully/nearly fully collateralised derivatives and Security Financing Transcations

Regulation
Regulation (EU) No 575/2013 (CRR)
Article
162, para. 2
Topic
Credit risk
Submitted by
Other
Submitted
2017-02-16
Answered
2017-07-14
Answer provided by
ESAs (EBA, ESMA, EIOPA)
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Question

How do you calculate the effective maturity for Internal Model Method (IMM) eligible trades which are collateralised/ nearly collateralised?

Background

Articles 162(2)(c) and 162(2)(d) CRR describe the effective maturity calculation for collateralised/ nearly collateralised trades for General case. However for IMM eligible trades which are collateralised/ nearly collateralised the calculation is not clear. Clarification on effective maturity calculation for IMM eligible, collateralised trades is necessary.

Answer

If an institution, which has 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 CRR, clears bilaterally with a corporate, institution or central bank, the maturity for deriving the risk weight is determined according to Article 162(2) CRR. For netting sets for which an institution applies the internal model method and for which the longest-dated contract within the netting set has a maturity of more than one year, the maturity is calculated by the formula in Article 162(2)(g) CRR. This provision applies regardless of whether the transaction is collateralised or not. For netting sets for which an institution applies the internal model method and for which the longest-dated contract within the netting set has a maturity of less than or equal to one year, the maturity is calculated by the methods given in Article 162(2)(b) or (c) CRR for derivatives and Article 162(2)(d) CRR for Securities Financing Transactions (SFT).

Original source: European Banking Authority, Q&A ID 2017_3169

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.

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