EBA · 2017_3450 Final Q&A

Calculation of general risk capital requirement for underwriting commitment regarding bond issuance and bond issuance programs under duration-based method specified in Article 340 of the CRR.

Regulation
Regulation (EU) No 575/2013 (CRR)
Article
340, para. -
Topic
Market risk
Submitted by
Individual
Submitted
2017-08-10
Answered
2018-01-19
Answer provided by
ESAs (EBA, ESMA, EIOPA)
Browse ECB SSM Register → More Q&As on this regulation →

Question

How should the capital requirement under duration-based calculation of general risk specified in Article 340 CRR be calculated where an institution is acting as an underwriter in bond issuance or bond issuance program? In particular, how to calculate the capital requirement before fixing of the coupon rate for bonds being issued and after that date?

Background

According to article 345 of the CRR, when an institution is acting as an underwriter, it is obliged to calculate capital requirements related to underwriting commitment since “working day zero” which is defined as the working day on which an institution becomes unconditionally committed to accepting a known quantity of securities at an agreed price. We would like to clarify whether an institution should calculate general risk capital requirement since fixing of the coupon rate for particular issuance of bonds or since entering into contract as an underwriter.

Answer

In the case of the underwriting of debt instruments according to Article 345 CRR, institutions generally have to calculate own funds requirements from working day 0 onwards. Working day 0 is defined as “… the working day on which the institution  becomes unconditionally committed to accepting a known quantity of securities at an agreed price. …”. In the case of bond issuances, a price is considered to be agreed if the coupon (fixed-rate instruments)/ reference rate (floating-rate instruments) has been fixed. No own funds requirements for interest rate risk according to 345 CRR in connection with Art. 339 and 340 CRR have to be calculated prior to the fixing of the coupon/reference rate, because there is no market risk.

Original source: European Banking Authority, Q&A ID 2017_3450

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

Calculation of the own funds requirements for market risk for positions in specific instruments, e.g. weather derivatives, emission certificates and inflation-linked products

Answered 2014-09-19

Calculation of institution-specific countercyclical capital buffer rates

Answered 2019-06-21

Scope of application of Articles 339 and 340 of Regulation (EU) No 575/2013 (CRR)

Answered 2013-11-15

Recognition of deducted items in calculation of own funds requirements for market risk

Answered 2022-07-15

Underwriting Commitments

Answered 2014-08-22

More Q&As on this topic

Application of Article 207(2) of the CRR to financial collateral under the counterparty credit risk framework

Answered 2026-05-29

SPV repack transactions

Answered 2026-05-29

Exclusion of back-to-back positions from RRAO

Answered 2025-10-31

Sources for external classification that is commonly used in the market for grouping issuers by sector, for the purpose of CRR Article 325ah.

Answered 2025-10-17

Multilateral development banks classification for the purpose of article 325ah

Answered 2025-06-27

📋 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.