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Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012 (Text with EEA relevance)
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1 . In relation to repurchase transactions and securities lending or borrowing transactions, where an institution uses the Supervisory Volatility Adjustments Approach under Article 224 or the Own Estimates Approach under Article 225 and where the conditions set out in points (a) to (h) of paragraph 2 are satisfied, institutions may, instead of applying the volatility adjustments calculated under Articles 224 to 226, apply a 0 % volatility adjustment. Institutions using the internal models approach set out in Article 221 shall not use the treatment set out in this Article.
2 . Institutions may apply a 0 % volatility adjustment where all the following conditions are met:
( a ) both the exposure and the collateral are cash or debt securities issued by central governments or central banks within the meaning of Article 197(1)(b) and eligible for a 0 % risk weight under Chapter 2;
( b ) both the exposure and the collateral are denominated in the same currency;
( c ) either the maturity of the transaction is no more than one day or both the exposure and the collateral are subject to daily marking-to-market or daily re-margining;
( d ) the time between the last marking-to-market before a failure to re-margin by the counterparty and the liquidation of the collateral is no more than four business days;
( e ) the transaction is settled in a settlement system proven for that type of transaction;
( f ) the documentation covering the agreement or transaction is standard market documentation for repurchase transactions or securities lending or borrowing transactions in the securities concerned;
( g ) the transaction is governed by documentation specifying that where the counterparty fails to satisfy an obligation to deliver cash or securities or to deliver margin or otherwise defaults, then the transaction is immediately terminable;
( h ) the counterparty is considered a core market participant by the competent authorities.
3 . The core market participants referred to in point (h) of paragraph 2 shall include the following entities:
( a ) the entities mentioned in Article 197(1)(b) exposures to which are assigned a 0 % risk weight under Chapter 2;
( b ) institutions;
( c ) other financial undertakings [F1that are an insurance undertaking or reinsurance undertaking, an insurance holding company (as defined in the Solvency 2 Regulations 2015), or a mixed financial holding company] exposures to which are assigned a 20 % risk weight under the Standardised Approach or which, in the case of institutions calculating risk-weighted exposure amounts and expected loss amounts under the IRB Approach, do not have a credit assessment by a recognised ECAI and are internally rated by the institution;
( d ) regulated CIUs that are subject to capital or leverage requirements;
( e ) regulated pension funds;
( f ) recognised clearing organisations.]
Editorial Information
X1Substituted by Corrigendum to Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012 (OJ L 176, 27.6.2013, p. 1).
Textual Amendments
F1Words in Art. 227(3)(c) substituted (31.12.2020) by The Capital Requirements (Amendment) (EU Exit) Regulations 2018 (S.I. 2018/1401), regs. 1(3), 142 (with savings in S.I. 2019/680, reg. 11); 2020 c. 1, Sch. 5 para. 1(1)
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