TITLE IU.K. [X1VALUATION AND RISK-BASED CAPITAL REQUIREMENTS (PILLAR I), ENHANCED GOVERNANCE (PILLAR II) AND INCREASED TRANSPARENCY (PILLAR III)]
CHAPTER VU.K. SOLVENCY CAPITAL REQUIREMENT STANDARD FORMULA
SECTION 5 U.K. Market risk module
Subsection 5 U.K. Spread risk sub-module
Article 180U.K.Specific exposures
1.Exposures in the form of bonds referred to Article 52(4) of Directive 2009/65/EC (covered bonds) which have been assigned to credit quality step 0 or 1 shall be assigned a risk factor stressi according to the following table.
2.Exposures in the form of bonds and loans to the following shall be assigned a risk factor stressi of 0 %:
(a)the European Central Bank;
(b)Member States' central government and central banks denominated and funded in the domestic currency of that central government and the central bank;
(c)multilateral development banks referred to in paragraph 2 of Article 117 of Regulation (EU) No 575/2013;
(d)international organisations referred to in Article 118 of Regulation (EU) No 575/2013;
Exposures in the form of bonds and loans that are fully, unconditionally and irrevocably guaranteed by one of the counterparties mentioned in points (a) to (d), where the guarantee meets the requirements set out in Article 215, shall also be assigned a risk factor stressi of 0 %.
3.Exposures in the form of bonds and loans to central governments and central banks other than those referred to in point (b) of paragraph 2, denominated and funded in the domestic currency of that central government and central bank, and for which a credit assessment by a nominated ECAI is available shall be assigned a risk factor stressi depending on the credit quality step and the duration of the exposure according to the following table:
4.Exposures in the form of bonds and loans to an insurance or reinsurance undertaking for which a credit assessment by a nominated ECAI is not available and where this undertaking meets its Minimum Capital Requirement, shall be assigned a risk factor stressi from the table in Article 176(3) depending on the undertaking's solvency ratio, using the following mapping between solvency ratios and credit quality steps:
| Solvency ratio | 196 % | 175 % | 122 % | 95 % | 75 % | 75 % |
| Credit quality step | 1 | 2 | 3 | 4 | 5 | 6 |
Where the solvency ratio falls in between the solvency ratios set out in the table above, the value of stressi shall be linearly interpolated from the closest values of stressi corresponding to the closest solvency ratios set out in the table above. Where the solvency ratio is lower than 75 %, stressi shall be equal to the factor corresponding to the credit quality steps 5 and 6. Where the solvency ratio is higher than 196 %, stressi shall be the same as the factor corresponding to the credit quality step 1.
For the purposes of this paragraph, ‘solvency ratio’ denotes the ratio of the eligible amount of own funds to cover the Solvency Capital Requirement and the Solvency Capital Requirement, using the latest available values.
5.Exposures in the form of bonds and loans to an insurance or reinsurance undertaking which does not meet its Minimum Capital Requirement shall be assigned a risk factor stressi according to the following table:
6.Paragraphs 4 and 5 of this Article shall only apply as of the first date of public disclosure, by the undertaking corresponding to the exposure, of the report on its solvency and financial condition referred to in Article 51 of Directive 2009/138/EC. Before that date, if a credit assessment by a nominated ECAI is available for the exposures, Article 176 of this Regulation shall apply, otherwise, the exposures shall be assigned the same risk factor as the ones that would result from the application of paragraph 4 of this Article to exposures to an insurance or reinsurance undertaking whose solvency ratio is 100 %.
7.Exposures in the form of bonds and loans to a third country insurance or reinsurance undertaking for which a credit assessment by a nominated ECAI is not available, situated in a country whose solvency regime is deemed equivalent to that laid down in Directive 2009/138/EC in accordance with Article 227 of Directive 2009/138/EC, and which complies with the solvency requirements of that third-country, shall be assigned the same risk factor as the ones that would result from the application of paragraph 4 of this Article to exposures to an insurance or reinsurance undertaking whose solvency ratio is 100 %.
8.Exposures in the form of bonds and loans to credit institutions and financial institutions within the meaning of points (1) and (26) of Article 4(1) of Regulation (EU) No 575/2013 which comply with the solvency requirements set out in Directive 2013/36/EU and Regulation (EU) No 575/2013, for which a credit assessment by a nominated ECAI is not available, shall be assigned the same risk factor as the ones that would result from the application of paragraph 4 of this Article to exposures to an insurance or reinsurance undertaking whose solvency ratio is 100 %.
9.The capital requirement for spread risk on credit derivatives where the underlying financial instrument is a bond or a loan to any exposure listed in paragraph 2 shall be nil.
[F110. STS securitisation positions which fulfil the criteria set out in Article 243 of Regulation (EU) No 575/2013 and which are fully, unconditionally and irrevocably guaranteed by the European Investment Fund or the European Investment Bank, where the guarantee meets the requirements set out in Article 215, shall be assigned a risk factor stress i of 0 %.]
[F210a. Notwithstanding paragraph 10, securitisations issued before 1 January 2019 that qualify as type 1 securitisations in accordance with paragraph 10 in the version in force on 31 December 2018 shall be assigned a risk factor stress i of 0 % even where those securitisations are not STS securitisations which fulfil the requirements set out in Article 243 of Regulation (EU) No 575/2013.]
[F311. Exposures in the form of bonds and loans that fulfil the criteria set out in paragraph 12 shall be assigned a risk factor stress i depending on the credit quality step and the duration of the exposure according to the following table:
| Credit quality step | 0 | 1 | 2 | 3 | |||||
|---|---|---|---|---|---|---|---|---|---|
| Duration ( dur i ) | stress i | a i | b i | a i | b i | a i | b i | a i | b i |
| up to 5 | b i · dur i | — | 0,64 % | — | 0,78 % | — | 1,0 % | — | 1,67 % |
| More than 5 and up to 10 | a i + b i · ( dur i – 5) | 3,2 % | 0,36 % | 3,9 % | 0,43 % | 5,0 % | 0,5 % | 8,35 % | 1,0 % |
| More than 10 and up to 15 | a i + b i · ( dur i – 10) | 5,0 % | 0,36 % | 6,05 % | 0,36 % | 7,5 % | 0,36 % | 13,35 % | 0,67 % |
| More than 15 and up to 20 | a i + b i · ( dur i – 15) | 6,8 % | 0,36 % | 7,85 % | 0,36 % | 9,3 % | 0,36 % | 16,7 % | 0,67 % |
| More than 20 | min[ a i + b i · ( dur i – 20);1] | 8,6 % | 0,36 % | 9,65 % | 0,36 % | 11,1 % | 0,36 % | 20,05 % | 0,36 % |
12. The criteria for exposures that are assigned a risk factor in accordance with paragraph 11 shall be:
(a) the exposure relates to a qualifying infrastructure investment that meets the criteria set out in Article 164a;
(b) the exposure is not an asset that fulfils the following conditions:
(b) it is assigned to a matching adjustment portfolio in accordance with Article 77b(2) of Directive 2009/138/EC,
it has been assigned a credit quality step between 0 and 2;
(c) a credit assessment by a nominated ECAI is available for the exposure;
(d) the exposure has been assigned a credit quality step between 0 and 3.
13. Exposures in the form of bonds and loans that meet the criteria set out in paragraph 12(a) and (b), but do not meet the criteria set out in paragraph 12(c), shall be assigned a risk factor stress i equivalent to credit quality step 3 and the duration of the exposure in accordance with the table set out in paragraph 11.]
[F414. Exposures in the form of bonds and loans that fulfil the criteria set out in paragraph 15 shall be assigned a risk factor stress i depending on the credit quality step and the duration of the exposure according to the following table:
| Credit quality step | 0 | 1 | 2 | 3 | |||||
|---|---|---|---|---|---|---|---|---|---|
| Duration ( dur i ) | stress i | a i | b i | a i | b i | a i | b i | a i | b i |
| up to 5 | b i · dur i | — | 0,68 % | — | 0,83 % | — | 1,05 % | — | 1,88 % |
| More than 5 and up to 10 | a i + b i · ( dur i – 5) | 3,38 % | 0,38 % | 4,13 % | 0,45 % | 5,25 % | 0,53 % | 9,38 % | 1,13 % |
| More than 10 and up to 15 | a i + b i · ( dur i – 10) | 5,25 % | 0,38 % | 6,38 % | 0,38 % | 7,88 % | 0,38 % | 15,0 % | 0,75 % |
| More than 15 and up to 20 | a i + b i · ( dur i – 15) | 7,13 % | 0,38 % | 8,25 % | 0,38 % | 9,75 % | 0,38 % | 18,75 % | 0,75 % |
| More than 20 | min[ a i + b i · ( dur i – 20);1] | 9,0 % | 0,38 % | 10,13 % | 0,38 % | 11,63 % | 0,38 % | 22,50 % | 0,38 % |
15. The criteria for exposures that are assigned a risk factor in accordance with paragraph 14 shall be:
(a) the exposure relates to a qualifying infrastructure corporate investment that meets the criteria set out in Article 164b;
(b) the exposure is not an asset that fulfils the following conditions:
(b) it is assigned to a matching adjustment portfolio in accordance with Article 77b(2) of Directive 2009/138/EC,
it has been assigned a credit quality step between 0 and 2;
(c) a credit assessment by a nominated ECAI is available for the infrastructure entity.
(d) the exposure has been assigned a credit quality step between 0 and 3.
16. Exposures in the form of bonds and loans that meet the criteria set out in paragraph 15(a) and (b), but do not meet the criteria set out in paragraph 15(c), shall be assigned a risk factor stress i equivalent to credit quality step 3 and the duration of the exposure in accordance with the table set out in paragraph 14.]
Textual Amendments
F1 Substituted by Commission Delegated Regulation (EU) 2018/1221 of 1 June 2018 amending Delegated Regulation (EU) 2015/35 as regards the calculation of regulatory capital requirements for securitisations and simple, transparent and standardised securitisations held by insurance and reinsurance undertakings (Text with EEA relevance).
F2 Inserted by Commission Delegated Regulation (EU) 2018/1221 of 1 June 2018 amending Delegated Regulation (EU) 2015/35 as regards the calculation of regulatory capital requirements for securitisations and simple, transparent and standardised securitisations held by insurance and reinsurance undertakings (Text with EEA relevance).
F3 Inserted by Commission Delegated Regulation (EU) 2016/467 of 30 September 2015 amending Commission Delegated Regulation (EU) 2015/35 concerning the calculation of regulatory capital requirements for several categories of assets held by insurance and reinsurance undertakings (Text with EEA relevance).
F4 Inserted by Commission Delegated Regulation (EU) 2017/1542 of 8 June 2017 amending Delegated Regulation (EU) 2015/35 concerning the calculation of regulatory capital requirements for certain categories of assets held by insurance and reinsurance undertakings (infrastructure corporates) (Text with EEA relevance).
Editorial Information
X1 Substituted by Corrigendum to Commission Delegated Regulation (EU) 2015/35 of 10 October 2014 supplementing Directive 2009/138/EC of the European Parliament and of the Council on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II) (Official Journal of the European Union L 12 of 17 January 2015).