EBA · 2022_6605 Rejected question

Exposure Value in repurchase transaction

Regulation
Regulation (EU) No 575/2013 (CRR)
Article
223
Topic
Credit risk
Submitted by
Credit institution
Submitted
2022-10-10
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Question

Under the accounting framework (IFRS) a repurchase transaction is accounted for as an off balance sheet commitment (encumbrance) for the debt securities given (or 'sold') and a liability for the debt towards the counterparty (representing the future 'repurchase' of the debt securities). With regards to such a transaction we have the following three questions, to confirm that our understanding is correct: A/ Is it correct that for the repurchase operation the final exposure value is to be calculated using the following elements:      E = the (dirty) market value of the debt securities given      C = the (dirty) cash borrowed in respect of the repurchase operation B/ Is this final exposure value E* to be presented as an counterparty credit risk on balance sheet exposure? C/ Does the debt securities itself also still have to be included as seperate exposures (with their respective risk weighted assets) (or does the calculated exposure value for the repurchase operation replace the direct exposure on the debt securities)?

Background

The institution is planning the first repurchase and reverse repurchase transactions and seeks clarrification regarding the CRR treatment.
No answer published yet.

Original source: European Banking Authority, Q&A ID 2022_6605

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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