CCR treatment of exposures arising from centrally cleared transactions - indirect clearing flows

According to Article 305(4) of Regulation (EU) No 575/2013 (CRR), in the case of a multi-level client structure, an institution that is a lower-level client accessing the services of a CCP through a higher-level client may apply the treatment set out in Article 305(2) or (3) of the CRR only where the conditions set out therein are met at every level of that structure. This should apply also to the case of a clearing flow involving clients’ transactions, where the institution acts as a financial intermediary, i.e. the institution should verify that Article 305(2) or (3) safeguards are met at every level of the structure before applying Article 306(1) of the CRR. On the 4 possible clearing flows, the application of Art. 305(4) of the CRR to the proposed examples is as follows (always from the perspective of the  institution ): 1. Client >  institution  > clearing member > CCP EADs/RWAs: Client leg: bilateral exposure and client’s risk weight (RW) Clearing member leg: - If the conditions under Art. 305(2) or (3) are not met, bilateral exposure and clearing member’s RW - If the conditions under Art. 305(2) are met Art. 306(1), point (a): 2% RW for QCCPs Art. 306(1), point (c): the institution may set the exposure value to zero, where the institution is not required to reimburse the client for any losses in case the CCP defaults, in accordance with Art. 306(1), point (c), or the clearing member defaults in accordance with Art. 305(2), point (a) - If the conditions under Art. 305(3) are met Art. 306(1), point (a): 4% RW for QCCPs Art. 306(1), point (c): the institution may set the exposure value to zero, where the institution is not required to reimburse the client for any losses in case the CCP defaults, in accordance with Art. 306(1), point (c), or the clearing member defaults in accordance with Art. 305(2), point (a) 2. Institution  > clearing member > CCP EADs/RWAs: Clearing member leg: - If the conditions under Art. 305(2) or (3) are not met, bilateral exposure and clearing member’s RW - If the conditions under Art. 305(2) are met Art. 306(1), point (a): 2% RW for QCCPs - If the conditions under Art. 305 (3) are met Art. 306(1), point (a): 4% RW for QCCPs 3. Client >  institution  > intermediary/higher-level client > clearing member > CCP EADs/RWAs: Client leg: bilateral exposure and client’s RW Intermediary/higher-level client leg: - If the conditions under Art. 305(2) or (3) are not met at every level of the structure, bilateral exposure and intermediary/higher-level client’s RW - If the conditions under Art. 305(2) are met at every level of the structure Art. 306(1), point (a): 2% RW for QCCPs Art. 306(1), point (c): the institution may set the exposure value to zero, where the institution is not required to reimburse the client for any losses in case the CCP defaults, in accordance with Art. 306(1), point (c), or the clearing member or the intermediary/higher-level client default, in accordance with Art. 305(2), point (a), and Art. 305(4) - If the conditions under Art. 305(3) are met at every level of the structure Art. 306(1), point (a): 4% RW for QCCPs Art. 306(1), point (c): the institution may set the exposure value to zero, where the institution is not required to reimburse the client for any losses in case the CCP defaults, in accordance with Art. 306(1), point (c), or the clearing member or the intermediary/higher-level client default, in accordance with Art. 305(2), point (a), and Art. 305(4) 4. Institution  > intermediary/higher-level client > clearing member > CCP EADs/RWAs: Intermediary/higher-level client leg: - If the conditions under Art. 305(2) or (3) are not met at every level of the structure, bilateral exposure and intermediary/higher-level client’s RW - If the conditions under Art. 305(2) are met at every level of the structure Art. 306(1), point (a): 2% RW for QCCPs - If the conditions under Art. 305(3) are met at every level of the structure Art. 306(1), point (a): 4% RW for QCCPs