Question ID
2014_830
Legal act
Regulation (EU) No 575/2013 (CRR)
Topic
Market risk
Article
Article 384,162 (2) g, 162 (2) b
COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations
Not applicable
Article/Paragraph
Not applicable
Name of institution / submitter
AFME - Association for Financial Markets in Europe
Country of incorporation / residence
UK
Type of submitter
Industry association
Subject matter
Interpretation of EADitotal and Mi in the standardised CVA charge.
Question

Where there are several trades with the same counterparty but there is no regulatory netting agreement in place: Is one EADitotal and one Mi applied per counterparty within the formula? If one EADitotal and one Mi is applied per counterpart, can the Mi be calculated as the weighted average notional? (ambiguity arises because the CRR guidance referred to on maturity only references trades in a netting set for the calculation of a weighted average notional (article 162 (2) b)) If in the above case it is determined that individual trades are to be treated separately with no weighted average notional maturity calculated, is each EAD and M applied and treated as a separate counterparty within the formula?

Background on the question

Exposure Per article 384, EADitotal is defined as the total counterparty credit risk exposure value of counterparty “i” (summed across its netting sets) Maturity With respect to Mi, for exposures not using the internal models approach to calculate maturity, Mi is defined as average notional weighted maturity as referred to in point (b) of Article 162(2). Article 162 (2) b only refers to the calculation of average notional weighted maturity for trades that are part of a netting agreement and does not refer to the calculation of an average where there are several trades with one counterparty but no netting agreement in place. For exposures following the internal Model method, the maturity per netting set is calculated according to the formula in article 162.

Submission date
Rejected publishing date
Rationale for rejection

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Status
Rejected question