Exposure amount for unfunded default fund contribution (UDFC)

How should the exposure value of UDFC from an own fund requirement and from a leverage ratio perspective be calculated?

Article 309(2) CRR defines “unfunded contribution” as “contributions that an institution acting as a clearing member has contractually committed to provide to a CCP after the CCP has depleted its default fund to cover the losses it incurred following the default of one or more of its clearing members.” The treatment of unfunded default fund contribution (UDFC) from the risk weight perspective is clearly described in Articles 307-310 CRR. The calculation of the exposure amount arising from the unfunded contributions to the default fund is however not detailed in CRR. In practice the majority of the CCPs require to apply a multiplier on the pre-funded DFC to get the nominal amount of the UDFC. At the same time, the UDFC is an off balance sheet item and thus a credit conversion factor (CCF) should apply on this nominal amount. The counterparty credit risk chapter (Chapter 6 of Title II of Part Three) of CRR does not define such a CCF. Chapter 2 of Title II of Part Three (standardized approach) and Chapter 3 of Title II of Part Three (internal rating based approach) of the CRR are not applicable with regard to the default fund contribution. The question is also relevant from the Leverage ratio perspective. EBA Q&A 3014 gives guidance in general on default fund contribution (without distinction of the pre-funded and unfunded parts) that it needs to be taken into account in the Leverage ratio framework. However Article 429 CRR disregards the description of the exposure calculation of the UDFC. Its classification into the Full/Medium/Low risk items in Annex I of the CRR is also not detailed.