Changes from plenary report to adopted text

RemovedCross-bucket correlation for the reference credit spread risk

Removed1. The cross-bucket correlations for the reference credit spread delta risk and reference credit spread vega risk shall be the same as the cross-bucket correlation for the counterparty credit spread delta risk, set out in Article 383q, Table 4.

Removed2. By derogation from paragraph 1, the cross-bucket correlation values calculated in paragraph 1 shall be divided by 2 for buckets 1 to 8 and 11 to 17.

Removed1. The risk weights for the delta sensitivities to equity spot price risk factors shall be the same for all equity risk exposures within each bucket in Table 6 and shall be the following:

RemovedTable 6

Removed2. For the purposes of paragraph 1, what constitutes a small and a large capitalisation shall be specified in the regulatory technical standards referred to in Article 325bd(7).

Removed3. For the purposes of paragraph 1, what constitutes an emerging market and an advanced economy shall be specified in the regulatory technical standards referred to in Article 325ap(3).

Removed4. When assigning a risk exposure to a sector, institutions shall rely on a classification that is commonly used in the market for grouping issuers by industry sector. Institutions shall assign each issuer to one of the sector buckets in paragraph 1, Table 6, and shall assign all issuers from the same industry to the same sector. Risk exposures from any issuer that an institution cannot assign to a sector in that fashion shall be assigned to bucket 11. Multinational or multi-sector equity issuers shall be allocated to a particular bucket on the basis of the most material region and sector in which the equity issuer operates.

Removed5. The risk weights for equity vega risk shall be set at 78% for buckets 1 to 8 and bucket 12, and to 100% for all other buckets.

RemovedThe cross-bucket correlation parameter for equity delta and vega risk shall be set at:

Removed(a) 15%, where the two buckets fall within buckets 1 to 10 of Article 383t(1), Table 6;

Removed(b) 75%, where the two buckets are buckets 12 and 13 of Article 383t(1), Table 6;

Removed(c) 45%, where one of the buckets is bucket 12 or 13 of Article 383t(1), Table 6, and the other bucket falls between buckets 1 to 10 of Article 383t(1), Table 6;

Removed(d) 0%, where one of the two buckets is bucket 11 of Article 383t(1), Table 6.

Removed1. The risk weights for the delta sensitivities to commodity spot price risk factors shall be the same for all commodity risk exposures within each bucket in Table 7 and shall be the following:

RemovedTable 7

Removed2. The risk weights for commodity vega risk shall be set at 100%.

Removed1. The cross-bucket correlation parameter for commodity delta risk shall be set at:

Removed(a) 20%, where the two buckets fall within buckets 1 to 11 of Article 383v(1), Table 7;

Removed(b) 0%, where one of the two buckets is bucket 12 of Article 383v(1), Table 7.

Removed2. The cross-bucket correlation parameter for commodity vega risk shall be set at:

Removed(a) 20%, where the two buckets fall within buckets 1 to 11 of Article 383v(1), Table 7;

Removed(b) 0%, where one of the two buckets is bucket 12 of Article 383v(1), Table 7.’;

Removed(170) Articles 384, 385 and 386 are replaced by the following:

Removed‘Article 384 Basic approach

Removed1. An institution shall calculate the own funds requirements for CVA risk in accordance with paragraphs 2 or 3, as applicable, for a portfolio of transactions with one or more counterparties by using one of the following formulae, as appropriate:

Removed(a) the formula set out in paragraph 2, where the institution includes in the calculation one or more eligible hedges recognised in accordance with Article 386;

Removed(b) the formula set out in paragraph 3, where the institution does not include in the calculation any eligible hedges recognised in accordance with Article 386.

RemovedThe approaches set out in points (a) and (b) shall not be used in combination.

Removed2. An institution that meets the condition referred to in paragraph 1, point (a), shall calculate the own funds requirements for CVA risks as follows:

Removedwhere:

Removed= the own funds requirements for CVA risk under the basic approach;

Removed= the own funds requirements for CVA risk under the basic approach as calculated in accordance with paragraph 3 for an institution that meets the condition laid down in paragraph 1, point (b);

Removed= 0,65;

Removed= 0,25;

Removedwhere:

Removed= 1,4;

Removed= 0,5;

Removedc = the index that denotes all the counterparties for which the institution calculates the own funds requirements for CVA risk using the approach laid down in this Article;

RemovedNS = the index that denotes all the netting sets with a given counterparty for which the institution calculates the own funds requirements for CVA risk using the approach laid down in this Article;

Removedh = the index that denotes all the single-name instruments recognised as eligible hedges in accordance with Article 386 for a given counterparty for which the institution calculates the own funds requirements for CVA risk using the approach laid down in this Article ;

Removedi = the index that denotes all the index instruments recognised as eligible hedges in accordance with Article 386 for all the counterparties for which the institution calculates the own funds requirements for CVA risk using the approach laid down in this Article ;

Removed= the risk weight applicable to counterparty ‘c’. Counterparty ‘c’ shall be mapped to one of the risk weights based on a combination of sector and credit quality and determined in accordance with Table 1.

Removed= the effective maturity for the netting set NS with counterparty c;

RemovedFor an institution using the methods set out in Title II, Chapter 6, Section 6, shall be calculated in accordance with Article 162(2), point(g). However, for that calculation, shall not be capped at five years, but at the longest contractual remaining maturity in the netting set.

RemovedFor an institution not using the methods set out in Title II, Chapter 6, Section 6, shall be the average notional weighted maturity as referred to in Article 162(2), point (b). However, for that calculation, shall not be capped at five years, but at the longest contractual remaining maturity in the netting set.

Removed= the counterparty credit risk exposure value of the netting set NS with counterparty c, including the effect of collateral in accordance with the methods set out in Title II, Chapter 6, Sections 3 to 6, as applicable to the calculation of the own funds requirements for counterparty credit risk referred to in Article 92(4), points (a) and (f);

Removed= the supervisory discount factor for the netting set NS with counterparty c.

RemovedFor an institution, using the methods set out in Title II, Chapter 6, Section 6, the supervisory discount factor shall be set at 1. In all other cases, the supervisory discount factor shall be calculated as follows:

Removed= the supervisory correlation between the credit spread risk of counterparty c and the credit spread risk of a single-name instrument recognised as an eligible hedge h for counterparty c, determined in accordance with Table 2;

Removed= the residual maturity of a single-name instrument recognised as an eligible hedge;

Removed= the notional of a single name instrument recognised as an eligible hedge;

Removed= the supervisory discount factor for a single name instrument recognised as an eligible hedge, calculated as follows:

Removed= the supervisory risk weight of a single-name instrument recognised as an eligible hedge. Those risk weights shall be based on a combination of sector and credit quality of the reference credit spread of the hedging instrument and determined in accordance with Table 1;

Removed= the residual maturity of one or more positions in the same index instrument recognised as an eligible hedge. In the case of more than one positions in the same index instrument, shall be the notional-weighted maturity of all those positions;

Removed= the full notional of one or more positions in the same index instrument recognised as an eligible hedge. In the case of more than one positions in the same index instrument, shall be the notional-weighted maturity of all those positions;

Removed= the supervisory discount factor for one or more positions in the same index instrument recognised as an eligible hedge, calculated as follows:

Removed= the supervisory risk weight of an index instrument recognised as an eligible hedge. shall be based on a combination of sector and credit quality of all the index constituents, calculated as follows:

Removed(a) where all the index constituents belong to the same sector and have the same credit quality, as determined in accordance with Table 1, shall be calculated as the relevant risk weight of Table 1 for that sector and credit quality multiplied by 0,7;

Removed(b) where all the index constituents do not belong to the same sector or do not have the same credit quality , shall be calculated as a weighted average of the risk weights of all the index constituents, as determined in accordance with Table 1, multiplied by 0,7;