These RTS define the conditions and methodologies used to determine the overall exposure to a client or group of connected clients resulting from an exposure to a transaction with underlying assets, and the risks inherent in the structure of the transaction itself.
The standards will be part of the Single Rulebook aimed at enhancing regulatory harmonisation in the banking sector in the European Union (EU).
In particular, the draft RTS set out (i) the methodology for the calculation of the value of exposures to transactions with underlying assets, (ii) the procedure used to determine the contribution of underlying exposures to overall exposures to clients and groups of connected clients, and (iii) the conditions under which the structure of the transaction does not constitute an additional exposure.
One of the key elements of these RTS is the introduction of a materiality threshold below which institutions would not need to apply the look-through approach and identify the obligors of the underlying assets. The EBA considers this treatment appropriate when the value of the exposure is sufficiently small as to only immaterially contribute to the overall exposure to a certain client or group of connected clients. As such, in cases where the value of the institution's exposure to each underlying asset is smaller than 0.25 per cent of the institution's eligible capital, the immateriality condition would be fulfilled.
Press release
Final draft-RTS
© EBA
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