On-balance sheet netting - CRR Provision: Difference between revisions
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Under the FCSM, a 0% [[Risk weighting|risk weight]] may apply to the collateralised part of the [[exposure]], provided the exposure and the collateral are [[denominated in the same currency]], as specified in Article {{crrprov|222(6)}} of the | Under the FCSM, a 0% [[Risk weighting|risk weight]] may apply to the collateralised part of the [[exposure]], provided the exposure and the collateral are [[denominated in the same currency]], as specified in Article {{crrprov|222(6)}} of the [[CRR]] (whereas, in the presence of a currency mismatch, a 20% risk weight should be associated with the collateralised part of the exposure under Article {{crrprov|222}}(3) of the [[CRR]])<ref>[https://memofin-media.s3.eu-west-3.amazonaws.com/Documents/0001/08/c269a4fe664655021c4c92cd17ee0e88e87bf24d.pdf EBA Report on Credit Risk Mitigation Framework].</ref> | ||
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Latest revision as of 13:29, 14 August 2024
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Regulatory Capital Anatomy™
The JC’s untutored thoughts on how bank capital works. Article 219 On-balance sheet netting Loans to and deposits with the lending institution subject to on-balance sheet netting are to be treated by that institution as cash collateral for the purpose of calculating the effect of funded credit protection for those loans and deposits of the lending institution subject to on-balance sheet netting which are denominated in the same currency.
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Under the FCSM, a 0% risk weight may apply to the collateralised part of the exposure, provided the exposure and the collateral are denominated in the same currency, as specified in Article 222(6) of the CRR (whereas, in the presence of a currency mismatch, a 20% risk weight should be associated with the collateralised part of the exposure under Article 222(3) of the CRR)[1]