Directive 2006/48/EC of the European Parliament and of the council of 14 June 2006 relating to the taking up and pursuit of the business of credit institutions (recast) (Text with EEA relevance) (repealed) (c. 48)

ANNEX VI U.K. STANDARDISED APPROACH

PART 1 U.K. RISK WEIGHTS

6. EXPOSURES TO INSTITUTIONS U.K.

6.1. Treatment U.K.

23. One of the two methods described in points 26 to 27 and 29 to 32 shall apply in determining the risk weights for exposures to institutions. U.K.

24. Without prejudice to the other provisions of points 23 to 39, exposures to financial institutions authorised and supervised by the competent authorities responsible for the authorisation and supervision of credit institutions and subject to prudential requirements equivalent to those applied to credit institutions shall be risk‐weighted as exposures to institutions. U.K.

6.2. Risk-weight floor on exposures to unrated institutions U.K.

25. Exposures to an unrated institution shall not be assigned a risk weight lower than that applied to exposures to its central government. U.K.

6.3. Central government risk weight based method U.K.

26. Exposures to institutions shall be assigned a risk weight according to the credit quality step to which exposures to the central government of the jurisdiction in which the institution is incorporated are assigned in accordance with Table 3. U.K.

Table 3

Credit quality step to which central government is assigned	1	2	3	4	5	6
Risk weight of exposure	20 %	50 %	100 %	100 %	100 %	150 %

27. For exposures to institutions incorporated in countries where the central government is unrated, the risk weight shall be not more than 100 %. U.K.

28. For exposures to institutions with an original effective maturity of three months or less, the risk weight shall be 20 %. U.K.

6.4. Credit assessment based method U.K.

29. Exposures to institutions with an original effective maturity of more than three months for which a credit assessment by a nominated ECAI is available shall be assigned a risk weight according to Table 4 in accordance with the assignment by the competent authorities of the credit assessments of eligible ECAIs to six steps in a credit quality assessment scale. U.K.

Table 4

Credit quality step	1	2	3	4	5	6
Risk weight	20 %	50 %	50 %	100 %	100 %	150 %

30. Exposures to unrated institutions shall be assigned a risk weight of 50 %. U.K.

31. Exposures to an institution with an original effective maturity of three months or less for which a credit assessment by a nominated ECAI is available shall be assigned a risk weight according to Table 5 in accordance with the assignment by the competent authorities of the credit assessments of eligible ECAIs to six steps in a credit quality assessment scale: U.K.

Table 5

Credit quality step	1	2	3	4	5	6
Risk weight	20 %	20 %	20 %	50 %	50 %	150 %

32. Exposures to unrated institutions having an original effective maturity of three months or less shall be assigned a 20 % risk weight. U.K.

6.5. Interaction with short-term credit assessments U.K.

33. If the method specified in points 29 to 32 is applied to exposures to institutions, then the interaction with specific short-term assessments shall be as follows. U.K.

34. If there is no short-term exposure assessment, the general preferential treatment for short‐term exposures as specified in point 31 shall apply to all exposures to institutions of up to three months residual maturity. U.K.

35. If there is a short-term assessment and such an assessment determines the application of a more favourable or identical risk weight than the use of the general preferential treatment for short-term exposures, as specified in point 31, then the short-term assessment shall be used for that specific exposure only. Other short-term exposures shall follow the general preferential treatment for short-term exposures, as specified in point 31. U.K.

36. If there is a short-term assessment and such an assessment determines a less favourable risk weight than the use of the general preferential treatment for short-term exposures, as specified in point 31, then the general preferential treatment for short-term exposures shall not be used and all unrated short-term claims shall be assigned the same risk weight as that applied by the specific short-term assessment. U.K.

6.6. Short-term exposures in the national currency of the borrower U.K.

37. Exposures to institutions of a residual maturity of 3 months or less denominated and funded in the national currency may, subject to the discretion of the competent authority, be assigned, under both methods described in points 26 to 27 and 29 to 32, a risk weight that is one category less favourable than the preferential risk weight, as described in points 4 and 5, assigned to exposures to its central government. U.K.

38. No exposures of a residual maturity of 3 months or less denominated and funded in the national currency of the borrower shall be assigned a risk weight less than 20 %. U.K.

6.7 Investments in regulatory capital instruments U.K.

39. Investments in equity or regulatory capital instruments issued by institutions shall be risk weighted at 100 %, unless deducted from the own funds. U.K.

6.8 Minimum reserves required by the ECB U.K.

40. Where an exposure to an institution is in the form of minimum reserves required by the ECB or by the central bank of a Member State to be held by the credit institution, Member States may permit the assignment of the risk weight that would be assigned to exposures to the central bank of the Member State in question provided: U.K.

(a)

the reserves are held in accordance with Regulation (EC) No 1745/2003 of the European Central Bank of 12 September 2003 on the application of minimum reserves(1) or a subsequent replacement regulation or in accordance with national requirements in all material respects equivalent to that Regulation; and

(b)

in the event of the bankruptcy or insolvency of the institution where the reserves are held, the reserves are fully repaid to the credit institution in a timely manner and are not made available to meet other liabilities of the institution.

(1)

OJ L 250, 2.10.2003, p. 10.