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

• (c) monies due from transactions with a residual maturity of less than one year with:
• (i) the central government of a Member State or of a third country;
• (ii) regional governments or local authorities in a Member State or in a third country;
• (iii) public sector entities of a Member State or of a third country;
• (iv) multilateral development banks referred to in Article 117(2) and international organisations referred to in Article 118;
• (v) non-financial corporates, retail customers and SMEs;
• (vi) credit unions authorised by a competent authority, personal investment companies and clients that are deposit brokers to the extent that those assets do not fall under point (b) of this paragraph;

• (d) monies due from transactions with a residual maturity of at least six months but less than one year with:
• (i) the European Central Bank or the central bank of a Member State;
• (ii) the central bank of a third country;
• (iii) financial customers;

• (e) trade finance on-balance-sheet related products with a residual maturity of at least six months but less than one year;

- (f) assets encumbered for a residual maturity of at least six months but less than one year, except where those assets would be assigned a higher required stable funding factor in accordance with Articles 428ae to 428ah if they were held unencumbered, in which case the higher required stable funding factor that would apply to those assets if they were held unencumbered shall apply;

• (g) any other assets with a residual maturity of less than one year, unless otherwise specified in Articles 428r to 428ac.

Article 428ae

55 % required stable funding factor

Unencumbered shares or units in CIUs that are eligible for a 55 % haircut for the calculation of the liquidity coverage ratio in accordance with the delegated act referred to in Article 460(1) shall be subject to a 55 % required stable funding factor, regardless of whether they comply with the operational requirements and with the requirements on the composition of the liquidity buffer as set out in that delegated act.

Article 428af

65 % required stable funding factor

The following assets shall be subject to a 65 % required stable funding factor:

- (a) unencumbered loans secured by mortgages on residential property or unencumbered residential loans fully guaranteed by an eligible protection provider as referred to in point (e) of Article 129(1) with a residual maturity of one year or more, provided that those loans are assigned a risk weight of 35 % or less in accordance with Chapter 2 of Title II of Part Three;

• (b) unencumbered loans with a residual maturity of one year or more, excluding loans to financial customers and loans referred to in Articles 428r to 428ad, provided that those loans are assigned a risk weight of 35 % or less in accordance with Chapter 2 of Title II of Part Three.

Article 428ag

85 % required stable funding factor

The following assets and off-balance-sheet items shall be subject to a 85 % required stable funding factor:

• (a) any assets and off-balance-sheet items, including cash, posted as initial margin for derivative contracts, unless those assets would be assigned a higher required stable funding factor in accordance with Article 428ah if held unencumbered, in which case the higher required stable funding factor that would apply to those assets if they were held unencumbered shall apply;

• (b) any assets and off-balance-sheet items, including cash, posted as contribution to the default fund of a CCP, unless those would be assigned a higher required stable funding factor in accordance with Article 428ah if held unencumbered, in which case the higher required stable funding factor to be applied to the unencumbered asset shall apply;

• (c) unencumbered loans with a residual maturity of one year or more, excluding loans to financial customers and loans referred to in Articles 428r to 428af, which are not past due for more than 90 days and which are assigned a risk weight of more than 35 % in accordance with Chapter 2 of Title II of Part Three;

• (d) trade finance on-balance-sheet related products, with a residual maturity of one year or more;

• (e) unencumbered securities with a residual maturity of one year or more that are not in default in accordance with Article 178 and that are not eligible as liquid assets pursuant to the delegated act referred to in Article 460(1);

• (f) unencumbered exchange-traded equities that are not eligible as level 2B assets pursuant to the delegated act referred to in Article 460(1);

- (g) physically traded commodities, including gold but excluding commodity derivatives;

• (h) assets encumbered for a residual maturity of one year or more in a cover pool funded by covered bonds as referred to in Article 52(4) of Directive 2009/65/EC or covered bonds which meet the eligibility requirements for the treatment as set out in Article 129(4) or (5) of this Regulation.

Article 428ah

100 % required stable funding factor

• (a) unless otherwise specified in this Chapter, any assets encumbered for a residual maturity of one year or more;

• (b) any assets other than those referred to in Articles 428r to 428ag, including loans to financial customers having a residual contractual maturity of one year or more, non-performing exposures, items deducted from own funds, fixed assets, non-exchange-traded equities, retained interest, insurance assets, defaulted securities.

The following rules shall apply to the calculation referred to in the first subparagraph:

- (a) variation margin received by institutions from their counterparties shall be deducted from the fair value of a netting set with positive fair value where the collateral received as variation margin qualifies as a level 1 asset pursuant to the delegated act referred to in Article 460(1), excluding extremely high quality covered bonds specified in that delegated act, and where institutions are legally entitled and operationally able to reuse that collateral;

- (b) all variation margin posted by institutions with their counterparties shall be deducted from the fair value of a netting set with negative fair value.

CHAPTER 5 Derogation for small and non-complex institutions

Article 428ai

Derogation for small and non-complex institutions

By way of derogation from Chapters 3 and 4, small and non-complex institutions may choose, with the prior permission of their competent authority, to calculate the ratio between an institution's available stable funding as referred to in Chapter 6, and the institution's required stable funding as referred to in Chapter 7, expressed as a percentage.

A competent authority may require a small and non-complex institution to comply with the net stable funding requirement based on an institution's available stable funding as referred to in Chapter 3 and the required stable funding as referred to in Chapter 4 where it considers that the simplified methodology is not adequate to capture the funding risks of that institution.

CHAPTER 6 Available stable funding for the simplified calculation of the net stable funding ratio

Section 1 General provisions

Article 428aj

Simplified calculation of the amount of available stable funding

1. Unless otherwise specified in this Chapter, the amount of available stable funding shall be calculated by multiplying the accounting value of various categories or types of liabilities and own funds by the available stable funding factors to be applied under Section 2. The total amount of available stable funding shall be the sum of the weighted amounts of liabilities and own funds.

Article 428ak

Residual maturity of a liability or own funds

3. Institutions shall treat deposits with fixed notice periods in accordance with their notice period, and shall treat term deposits in accordance with their residual maturity. By way of derogation from paragraph 2 of this Article, institutions shall not take into account options for early withdrawals where the depositor has to pay a material penalty for early withdrawals which occur in less than one year, such penalty being laid down in the delegated act referred to in Article 460(1), to determine the residual maturity of term retail deposits.

4. In order to determine the available stable funding factors to be applied under Section 2, for liabilities with a residual contractual maturity of one year or more, any portion that matures in less than six months and any portion that matures between six months and less than one year, shall be treated as having a residual maturity of less than six months and between six months and less than one year, respectively.

Section 2 Available stable funding factors

Article 428al

0 % available stable funding factor

• (a) deferred tax liabilities, which shall be treated in accordance with the nearest possible date on which such liabilities could be realised;

• (b) minority interests, which shall be treated in accordance with the term of the instrument concerned.

• (a) 0 %, where the effective residual maturity of the deferred tax liability or minority interest is less than one year;

• (b) 100 %, where the effective residual maturity of the deferred tax liability or minority interest is one year or more.

• (a) trade date payables arising from purchases of financial instruments, of foreign currencies and of commodities, that are expected to settle within the standard settlement cycle or period that is customary for the relevant exchange or type of transaction, or that have failed to settle but are nonetheless expected to settle;

• (b) liabilities that are categorised as being interdependent with assets in accordance with Article 428f;

• (c) liabilities with a residual maturity of less than one year provided by:
• (i) the ECB or the central bank of a Member State;
• (ii) the central bank of a third country;
• (iii) financial customers;

• (d) any other liabilities and capital items or instruments not referred to in this Article and Articles 428am to 428ap.

The following rules shall apply to the calculation referred to in the first subparagraph:

- (a) variation margin received by institutions from their counterparties shall be deducted from the fair value of a netting set with positive fair value where the collateral received as variation margin qualifies as a level 1 asset pursuant to the delegated act referred to in Article 460(1), excluding extremely high quality covered bonds specified in that delegated act, and where institutions are legally entitled and operationally able to reuse that collateral;

• (b) all variation margin posted by institutions with their counterparties shall be deducted from the fair value of a netting set with negative fair value.

Article 428am

50 % available stable funding factor

The following liabilities and capital items or instruments shall be subject to a 50 % available stable funding factor:

- (a) deposits received that fulfil the criteria for operational deposits set out in the delegated act referred to in Article 460(1);

• (b) liabilities and capital items or instruments with a residual maturity of less than one year provided by:
• (i) the central government of a Member State or of a third country;
• (ii) regional governments or local authorities in a Member State or in a third country;
• (iii) public sector entities of a Member State or of a third country;
• (iv) multilateral development banks referred to in Article 117(2) and international organisations referred to in Article 118;
• (v) non-financial corporate customers;
• (vi) credit unions authorised by a competent authority, personal investment companies and clients that are deposit brokers, with the exception of deposits received, that fulfil the criteria for operational deposits as set out in the delegated act referred to in Article 460(1).

Article 428an

90 % available stable funding factor

Sight retail deposits, retail deposits with a fixed notice period of less than one year and term retail deposits having a residual maturity of less than one year that fulfil the relevant criteria for other retail deposits set out in the delegated act referred to in Article 460(1) shall be subject to a 90 % available stable funding factor.

Article 428ao

95 % available stable funding factor

Sight retail deposits, retail deposits with a fixed notice period of less than one year and term retail deposits having a residual maturity of less than one year that fulfil the relevant criteria for stable retail deposits set out in the delegated act referred to in Article 460(1) shall be subject to a 95 % available stable funding factor.

Article 428ap

100 % available stable funding factor

The following liabilities and capital items and instruments shall be subject to a 100 % available stable funding factor:

• (a) the Common Equity Tier 1 items of the institution before the adjustments required pursuant to Articles 32 to 35, the deductions pursuant to Article 36 and the application of the exemptions and alternatives laid down in Articles 48, 49 and 79;

• (b) the Additional Tier 1 items of the institution before the deduction of the items referred to in Article 56 and before Article 79 has been applied thereto, excluding any instruments with explicit or embedded options that, if exercised, would reduce the effective residual maturity to less than one year;

• (c) the Tier 2 items of the institution before the deductions referred to in Article 66 and before the application of Article 79, having a residual maturity of one year or more, excluding any instruments with explicit or embedded options that, if exercised, would reduce the effective residual maturity to less than one year;

- (d) any other capital instruments of the institution with a residual maturity of one year or more, excluding any instruments with explicit or embedded options that, if exercised, would reduce the effective residual maturity to less than one year;

- (e) any other secured and unsecured borrowings and liabilities with a residual maturity of one year or more, including term deposits, unless otherwise specified in Articles 428al to 428ao.

CHAPTER 7 Required stable funding for the simplified calculation of the net stable funding ratio

Section 1 General provisions

Article 428aq

Simplified calculation of the amount of required stable funding

Assets that institutions have borrowed, including in securities financing transactions, that are not accounted for in their balance sheet but on which they have beneficial ownership shall be subject to the required stable funding factors to be applied under Section 2.

Assets that have less than six months remaining in the encumbrance period shall be subject to the required stable funding factors to be applied under Section 2 to the same assets if they were held unencumbered.

• (a) assets included in a pool which are available for immediate use as collateral to obtain additional funding under committed or, where the pool is operated by a central bank, uncommitted but not yet funded credit lines available to the institution, including assets placed by a credit institution with the central institution in a cooperative network or institutional protection scheme;

• (b) assets that the institution has received as collateral for credit risk mitigation purposes in secured lending, secured funding or collateral exchange transactions and that the institution may dispose of;

• (c) assets attached as non-mandatory over-collateralisation to a covered bond issuance.

For the purposes of point (a) of the first subparagraph of this paragraph, institutions shall assume that assets in the pool are encumbered in order of increasing liquidity on the basis of the liquidity classification set out in the delegated act referred to in Article 460(1), starting with assets ineligible for the liquidity buffer.

• (a) by way of derogation from Article 428aw and from point (a) of Article 428az(1), assets encumbered for the operations referred to in this subparagraph;

• (b) by way of derogation from Article 428aw and from point (b) of Article 428ay, monies resulting from the operations referred to in this subparagraph.

Competent authorities shall determine, in agreement with the central bank that is the counterparty to the transaction the required stable funding factor to be applied to the assets referred to in points (a) and (b) of the first subparagraph. For encumbered assets referred to in point (a) of the first subparagraph, the required stable funding factor to be applied shall not be lower than the required stable funding factor that would apply under Section 2 to those assets if they were held unencumbered.

When applying a reduced required stable funding factor in accordance with the second subparagraph, competent authorities shall closely monitor the impact of that reduced factor on institutions' stable funding positions and take appropriate supervisory measures where necessary.

10. Competent authorities may determine the required stable funding factors to be applied to off-balance-sheet exposures that are not referred to in this Chapter to ensure that institutions hold an appropriate amount of available stable funding for the portion of those exposures that are expected to require funding over the one-year horizon of the net stable funding ratio. To determine those factors, competent authorities shall, in particular, take into account the material reputational damage to the institution that could result from not providing that funding.

Competent authorities shall report to EBA the types of off-balance-sheet exposures for which they have determined the required stable funding factors at least once a year. They shall include in that report an explanation of the methodology applied to determine those factors.

Article 428ar

Residual maturity of an asset

3. When calculating the residual maturity of an asset, institutions shall take options into account, based on the assumption that the issuer or counterparty will exercise any option to extend the maturity of an asset. For options that are exercisable at the discretion of the institution, the institution and competent authorities shall take into account reputational factors that may limit the institution's ability not to exercise the option, in particular markets' and clients' expectations that the institution should extend the maturity of certain assets at their maturity date.

4. In order to determine the required stable funding factors to be applied in accordance with Section 2, for amortising loans with a residual contractual maturity of one year or more, the portions that mature in less than six months and between six months and less than one year shall be treated as having a residual maturity of less than six months and between six months and less than one year respectively.

Section 2 Required stable funding factors

Article 428as

0 % required stable funding factor

• (a) unencumbered assets that are eligible as level 1 high quality liquid assets pursuant to the delegated act referred to in Article 460(1), excluding extremely high quality covered bonds specified in that delegated act, regardless of whether they comply with the operational requirements as set out in that delegated act;

• (b) all reserves held by the institution in the ECB or in the central bank of a Member State or the central bank of a third country, including required reserves and excess reserves;

• (c) all claims on the ECB, the central bank of a Member State or the central bank of a third country that have a residual maturity of less than six months;

• (d) assets that are categorised as being interdependent with liabilities in accordance with Article 428f.

2. By way of derogation from point (b) of paragraph 1, competent authorities may decide, with the agreement of the relevant central bank, to apply a higher required stable funding factor to required reserves, taking into account, in particular, the extent to which reserve requirements exist over a one-year horizon and therefore require associated stable funding.

For subsidiaries having their head office in a third country, where the required central bank reserves are subject to a higher required stable funding factor under the net stable funding requirement set out in the national law of that third country, that higher required stable funding factor shall be taken into account for consolidation purposes.

Article 428at

5 % required stable funding factor

1. The undrawn portion of committed credit and liquidity facilities specified in the delegated act referred to in Article 460(1) shall be subject to a 5 % required stable funding factor.

Article 428au

10 % required stable funding factor

The following assets and off-balance-sheet items shall be subject to a 10 % required stable funding factor:

- (a) unencumbered assets that are eligible as level 1 extremely high quality covered bonds pursuant to the delegated act referred to in Article 460(1), regardless of whether they comply with the operational requirements and with the requirements on the composition of the liquidity buffer as set out in that delegated act;

• (b) trade finance off-balance-sheet related products as referred to in Annex I.

Article 428av

20 % required stable funding factor

Unencumbered assets that are eligible as level 2A assets pursuant to the delegated act referred to in Article 460(1), and unencumbered shares or units in CIUs pursuant to that delegated act shall be subject to a 20 % required stable funding factor, regardless of whether they comply with the operational requirements and with the requirements on the composition of the liquidity buffer as set out in that delegated act.

Article 428aw

50 % required stable funding factor

The following assets shall be subject to a 50 % required stable funding factor:

• (a) secured and unsecured loans with a residual maturity of less than one year and provided that they are encumbered less than one year;

- (b) any other assets with a residual maturity of less than one year, unless otherwise specified in Articles 428as to 428av;

• (c) assets encumbered for a residual maturity of at least six months but less than one year, except where those assets would be assigned a higher required stable funding factor in accordance with Articles 428ax, 428ay and 428az if they were held unencumbered, in which case the higher required stable funding factor that would apply to those assets if they were held unencumbered shall apply.

Article 428ax

55 % required stable funding factor

Assets that are eligible as level 2B assets pursuant to the delegated act referred to in Article 460(1), and shares or units in CIUs pursuant to that delegated act shall be subject to a 55 % required stable funding factor, regardless of whether they comply with the operational requirements and with the requirements on the composition of the liquidity buffer as set out in that delegated act, provided that they are encumbered less than one year.

Article 428ay

85 % required stable funding factor

The following assets and off-balance-sheet items shall be subject to a 85 % required stable funding factor:

• (a) any assets and off-balance-sheet items, including cash, posted as initial margin for derivative contracts or posted as contribution to the default fund of a CCP, unless those assets would be assigned a higher required stable funding factor in accordance with Article 428az if held unencumbered, in which case the higher required stable funding factor that would apply to those assets if they were held unencumbered shall apply;

• (b) unencumbered loans with a residual maturity of one year or more, excluding loans to financial customers, which are not past due for more than 90 days;

• (c) trade finance on-balance-sheet related products, with a residual maturity of one year or more;

• (d) unencumbered securities with a residual maturity of one year or more that are not in default in accordance with Article 178 and that are not eligible as liquid assets pursuant to the delegated act referred to in Article 460(1);

- (e) unencumbered exchange-traded equities that are not eligible as level 2B assets pursuant to the delegated act referred to in Article 460(1);

• (f) physically traded commodities, including gold but excluding commodity derivatives.

Article 428az

100 % required stable funding factor

• (a) any assets encumbered for a residual maturity of one year or more;

• (b) any assets other than those referred to in Articles 428as to 428ay, including loans to financial customers having a residual contractual maturity of one year or more, non-performing exposures, items deducted from own funds, fixed assets, non-exchange traded equities, retained interest, insurance assets, defaulted securities.

The following rules shall apply to the calculation referred to in the first subparagraph:

- (a) variation margin received by institutions from their counterparties shall be deducted from the fair value of a netting set with positive fair value where the collateral received as variation margin qualifies as a level 1 asset pursuant to the delegated act referred to in Article 460(1), excluding extremely high quality covered bonds specified in that delegated act, and where institutions are legally entitled and operationally able to reuse that collateral;

- (b) all variation margin posted by institutions with their counterparties shall be deducted from the fair value of a netting set with negative fair value.

PART SEVEN

LEVERAGE

Article 429

Calculation of the leverage ratio

Institutions shall calculate the leverage ratio at the reporting reference date.

• (a) assets, excluding derivative contracts listed in Annex II, credit derivatives and the positions referred to in Article 429e, calculated in accordance with Article 429b(1);

• (b) derivative contracts listed in Annex II and credit derivatives, including those contracts and credit derivatives that are off-balance-sheet, calculated in accordance with Articles 429c and 429d;

• (c) add-ons for counterparty credit risk of securities financing transactions, including those that are off-balance-sheet, calculated in accordance with Article 429e;

• (d) off-balance-sheet items, excluding derivative contracts listed in Annex II, credit derivatives, securities financing transactions and positions referred to in Articles 429d and 429g, calculated in accordance with Article 429f;

• (e) regular-way purchases or sales awaiting settlement, calculated in accordance with Article 429g.

Institutions shall treat long settlement transactions in accordance with points (a) to (d) of the first subparagraph, as applicable.

Institutions may reduce the exposure values referred to in points (a) and (d) of the first subparagraph by the corresponding amount of general credit risk adjustments to on- and off-balance-sheet items, respectively, subject to a floor of 0 where the credit risk adjustments have reduced the Tier 1 capital.

• (a) an off-balance-sheet item in accordance with point (d) of paragraph 4 that is treated as a derivative in accordance with the applicable accounting framework shall be subject to the treatment set out in point (b) of that paragraph;

• (b) where a client of an institution acting as a clearing member enters directly into a derivative transaction with a CCP and the institution guarantees the performance of its client's trade exposures to the CCP arising from that transaction, the institution shall calculate its exposure resulting from the guarantee in accordance with point (b) of paragraph 4, as if that institution had entered directly into the transaction with the client, including with regard to the receipt or provision of cash variation margin.

The treatment set out in point (b) of the first subparagraph shall also apply to an institution acting as a higher-level client that guarantees the performance of its client's trade exposures.

For the purposes of the first subparagraph, point (b), and of the second subparagraph of this paragraph, institutions may consider an affiliated entity as a client only where that entity is outside the regulatory scope of consolidation at the level at which the requirement set out in Article 92(4), point (e), is applied.

• (a) physical or financial collateral, guarantees or credit risk mitigation purchased shall not be used to reduce the total exposure measure;

• (b) assets shall not be netted with liabilities.

• (a) the granting of the loan is conditional upon the opening of the savings account at the institution granting the loan and both the loan and the savings account are regulated by the same sectoral law;

• (b) the balance on the savings account cannot be withdrawn, in part or in full, by the debtor for the entire duration of the loan;

- (c) the institution can unconditionally and irrevocably use the balance on the savings account to settle any claim originating under the loan agreement in cases regulated by the sectoral law referred to in point (a), including the case of non-payment by or the insolvency of the debtor.

‘Pre-financing loan’ or ‘intermediate loan’ means a loan that is granted to the borrower for a limited period of time in order to bridge the borrower's financing gaps until the final loan is granted in accordance with the criteria laid down in the sectoral law regulating such transactions.

Article 429a

Exposures excluded from the total exposure measure

• (a) the amounts deducted from Common Equity Tier 1 items in accordance with point (d) of Article 36(1);

• (b) the assets deducted in the calculation of the capital measure referred to in Article 429(3);

• (c) exposures that are assigned a risk weight of 0 % in accordance with Article 113(6) or (7);

• (ca) where the institution is a member of the network referred to in Article 113(7), the exposures that are assigned a risk weight of 0 % in accordance with Article 114 and arising from assets being an equivalent of deposits in the same currency of other members of that network stemming from legal or statutory minimum deposit in accordance with Article 422(3), point (b); in such a case exposures of other members of that network being legal or statutory minimum deposit are not subject to point (c) of this paragraph;

• (d) where the institution is a public development credit institution, the exposures arising from assets that constitute claims on central governments, regional governments, local authorities or public sector entities in relation to public sector investments, and promotional loans;

• (da) the institution’s exposures to its shareholders, provided that such exposures are collateralised to the level of at least 125 % by assets referred to in Article 129(1), points (d) and (e), and those assets are accounted for in the shareholders’ leverage ratio requirement, where the institution is not a public development credit institution but it meets the following conditions:
• (i) its shareholders are credit institutions and do not exercise control over the institution;
• (ii) it complies with paragraph 2, points (a), (b), (c) and (e), of this Article;
• (iii) its exposures are located in the same Member State;
• (iv) it is subject to some form of oversight by a Member State’s central government on an ongoing basis;
• (v) its business model is limited to the pass-through of the amount corresponding to the proceeds raised through the issuance of covered bonds to its shareholders, in the form of debt instruments;

• (e) where the institution is not a public development credit institution, the parts of exposures arising from passing-through promotional loans to other credit institutions;

• (f) the guaranteed parts of exposures arising from export credits that meet both of the following conditions:
• (i) the guarantee is provided by an eligible provider of unfunded credit protection in accordance with Articles 201 and 202, including by export credit agencies or by central governments;
• (ii) a 0 % risk weight applies to the guaranteed part of the exposure in accordance with Article 114(2) or (4) or Article 116(4);

• (g) where the institution is a clearing member of a QCCP, the trade exposures of that institution, provided that they are cleared with that QCCP and meet the conditions set out in point (c) of Article 306(1);

• (h) where the institution is a higher-level client within a multi-level client structure, the trade exposures to the clearing member or to an entity that serves as a higher-level client to that institution, provided that the conditions set out in Article 305(2) are met and provided that the institution is not obligated to reimburse its client for any losses suffered in the event of default of either the clearing member or the QCCP;

• (i) fiduciary assets which meet all the following conditions:
• (i) they are recognised on the institution's balance sheet by national generally accepted accounting principles, in accordance with Article 10 of Directive 86/635/EEC;
• (ii) they meet the criteria for non-recognition set out in International Financial Reporting Standard (IFRS) 9, as applied in accordance with Regulation (EC) No 1606/2002;
• (iii) they meet the criteria for non-consolidation set out in IFRS 10, as applied in accordance with Regulation (EC) No 1606/2002, where applicable;

• (j) exposures that meet all the following conditions:
• (i) they are exposures to a public sector entity;
• (ii) they are treated in accordance with Article 116(4);
• (iii) they arise from deposits that the institution is legally obliged to transfer to the public sector entity referred to in point (i) for the purpose of funding general interest investments;

• (k) the excess collateral deposited at tri-party agents that has not been lent out;

• (l) where under the applicable accounting framework an institution recognises the variation margin paid in cash to its counterparty as a receivable asset, the receivable asset, provided that the conditions set out in points (a) to (e) of Article 429c(3) are met;

• (m) the securitised exposures from traditional securitisations that meet the conditions for significant risk transfer set out in Article 244(2);

• (n) the following exposures to the institution’s central bank, subject to the conditions set out in paragraphs 5 and 6:
• (i) coins and banknotes constituting legal currency in the jurisdiction of the central bank;
• (ii) assets representing claims on the central bank, including reserves held at the central bank;

• (o) where the institution is authorised in accordance with Article 16 and point (a) of Article 54(2) of Regulation (EU) No 909/2014, the institution's exposures due to banking-type ancillary services listed in point (a) of Section C of the Annex to that Regulation which are directly related to the core or ancillary services listed in Sections A and B of that Annex;

• (p) where the institution is designated in accordance with point (b) of Article 54(2) of Regulation (EU) No 909/2014, the institution's exposures due to banking-type ancillary services listed in point (a) of Section C of the Annex to that Regulation which are directly related to the core or ancillary services of a central securities depository, authorised in accordance with Article 16 of that Regulation, listed in Sections A and B of that Annex;

• (q) the exposures that are subject to the treatment set out in Article 72e(5), first subparagraph.

For the purposes of point (m) of the first subparagraph, institutions shall include any retained exposure in the total exposure measure.

• (a) it has been established by a Member State's central government, regional government or local authority;

• (b) its activity is limited to advancing specified objectives of financial, social or economic public policy in accordance with the laws and provisions governing that institution, including articles of association, on a non-competitive basis;

• (c) its goal is not to maximise profit or market share;

• (d) subject to Union State aid rules, the central government, regional government or local authority has an obligation to protect the credit institution's viability or directly or indirectly guarantees at least 90 % of the credit institution's own funds requirements, funding requirements or promotional loans granted;

• (e) it does not take covered deposits as defined in point (5) of Article 2(1) of Directive 2014/49/EU or in national law implementing that Directive that may be classified as fixed term or savings deposits from consumers as defined in point (a) of Article 3 of Directive 2008/48/EC of the European Parliament and of the Council (³⁵).

For the purposes of point (b) of the first subparagraph, public policy objectives may include the provision of financing for promotional or development purposes to specified economic sectors or geographical areas of the relevant Member State.

For the purposes of points (d) and (e) of paragraph 1, and without prejudice to the Union State aid rules and the obligations of the Member States thereunder, competent authorities may, upon request of an institution, treat an organisationally, structurally and financially independent and autonomous unit of that institution as a public development credit institution, provided that the unit fulfils all the conditions listed in the first subparagraph and that such treatment does not affect the effectiveness of the supervision of that institution. Competent authorities shall without delay notify the Commission and EBA of any decision to treat, for the purposes of this subparagraph, a unit of an institution as a public development credit institution. The competent authority shall annually review such decision.

• (a) the institution's competent authority has determined, after consultation with the relevant central bank, and publicly declared that exceptional circumstances exist that warrant the exclusion in order to facilitate the implementation of monetary policies;

• (b) the exemption is granted for a limited period of time not exceeding one year;

• (c) the institution’s competent authority has determined, after consultation with the relevant central bank, the date when the exceptional circumstances are deemed to have started and publicly announced that date; that date shall be set at the end of a quarter.

• (a) they are denominated in the same currency as the deposits taken by the institution;

• (b) their average maturity does not significantly exceed the average maturity of the deposits taken by the institution.

Image omitted; see official source

where:

aLR	=	the adjusted leverage ratio;

| | | |

| --- | --- | --- | | EMLR | = | the institution’s total exposure measure as calculated in accordance with Article 429(4), including the exposures excluded in accordance with point (n) of paragraph 1 of this Article, on the date referred to in point (c) of paragraph 5 of this Article; and | | | | | | --- | --- | --- | | CB | = | the daily average total value of the institution’s exposures to its central bank, calculated over the full reserve maintenance period of the central bank immediately preceding the date referred to in point (c) of paragraph 5, that are eligible to be excluded in accordance with point (n) of paragraph 1. |

Article 429b

Calculation of the exposure value of assets

• (a) the exposure values of assets means an exposure value as referred to in the first sentence of Article 111(1);

• (b) securities financing transactions shall not be netted.

• (a) the institution offering the cash pooling arrangement transfers the credit and debit balances of several individual accounts of entities of a group included in the arrangement (‘original accounts’) into a separate, single account and thereby sets the balances of the original accounts to zero;

• (b) the institution carries out the actions referred to in point (a) of this subparagraph on a daily basis.

For the purposes of this paragraph and paragraph 3, cash pooling arrangement means an arrangement whereby the credit or debit balances of several individual accounts are combined for the purposes of cash or liquidity management.

• (a) the institution has a legally enforceable right to set off the balances of the original accounts through the transfer into a single account at any point in time;

• (b) there are no maturity mismatches between the balances of the original accounts;

• (c) the institution charges or pays interest based on the combined balance of the original accounts;

• (d) the competent authority of the institution considers that the frequency by which the balances of all original accounts are transferred is adequate for the purpose of including only the combined balance of the cash pooling arrangement in the total exposure measure.

• (a) the transactions have the same explicit final settlement date;

• (b) the right to set off the amount owed to the counterparty with the amount owed by the counterparty is legally enforceable in the normal course of business and in the event of default, insolvency and bankruptcy;

• (c) the counterparties intend to settle on a net basis or to settle simultaneously, or the transactions are subject to a settlement mechanism that results in the functional equivalent of net settlement.

• (a) the transactions are settled through the same settlement system or settlement systems using a common settlement infrastructure;

• (b) the settlement arrangements are supported by cash or intraday credit facilities intended to ensure that the settlement of the transactions will occur by the end of the business day;

• (c) any issues arising from the securities legs of the securities financing transactions do not interfere with the completion of the net settlement of the cash receivables and payables.

The condition set out in point (c) of the first subparagraph is met only where the failure of any securities financing transaction in the settlement mechanism may delay settlement of only the matching cash leg or may create an obligation to the settlement mechanism, supported by an associated credit facility.

Where there is a failure of the securities leg of a securities financing transaction in the settlement mechanism at the end of the window for settlement in the settlement mechanism, institutions shall split out this transaction and its matching cash leg from the netting set and treat them on a gross basis.

Article 429c

Calculation of the exposure value of derivatives

When calculating the exposure value, institutions may take into account the effects of contracts for novation and other netting agreements in accordance with Article 295. Institutions shall not take into account cross-product netting, but may net within the product category as referred to in point (25)(c) of Article 272 and credit derivatives where they are subject to a contractual cross-product netting agreement as referred to in point (c) of Article 295.

Institutions shall include in the total exposure measure sold options even where their exposure value can be set to zero in accordance with the treatment laid down in Article 274(5).

• (a) for trades not cleared through a QCCP, the cash received by the recipient counterparty is not segregated from the assets of the institution;

• (b) the variation margin is calculated and exchanged at least daily based on a mark-to-market valuation of derivatives positions;

• (c) the variation margin received is in a currency specified in the derivative contract, governing master netting agreement, credit support annex to the qualifying master netting agreement or as defined by any netting agreement with a QCCP;

• (d) the variation margin received is the full amount that would be necessary to extinguish the mark-to-market exposure of the derivative contract subject to the threshold and minimum transfer amounts that are applicable to the counterparty;

• (e) the derivative contract and the variation margin between the institution and the counterparty to that contract are covered by a single netting agreement that the institution may treat as risk-reducing in accordance with Article 295.

Where an institution provides cash collateral to a counterparty and that collateral meets the conditions set out in points (a) to (e) of the first subparagraph, the institution shall consider that collateral as the variation margin posted with the counterparty and shall include it in the calculation of the replacement cost.

For the purposes of point (b) of the first subparagraph, an institution shall be considered to have met the condition set out therein where the variation margin is exchanged on the morning of the trading day following the trading day on which the derivative contract was stipulated, provided that the exchange is based on the value of the contract at the end of the trading day on which the contract was stipulated.

For the purposes of point (d) of the first subparagraph, where a margin dispute arises, institutions may recognise the amount of non-disputed collateral that has been exchanged.

4a. By way of derogation from paragraphs 3 and 4, an institution may recognise any collateral received in accordance with Part Three, Title II, Chapter 6, Section 3 where all of the following conditions are met:

• (a) the collateral is received from a client for a derivative contract cleared by the institution on behalf of that client;

• (b) the contract referred to in point (a) is cleared through a QCCP;

• (c) where the collateral has been received in the form of initial margin, that collateral is segregated from the assets of the institution.

• (a) derivative contracts listed in Annex II and credit derivatives, where they also use that method for determining the exposure value of those contracts for the purposes of meeting the own funds requirements set out in Article 92(1), points (a), (b) and (c);

- (b) credit derivatives to which they apply the treatment set out in Article 273(3) or (5), where the conditions to use that method are met.

Where institutions apply one of the methods referred to in the first subparagraph, they shall not reduce the total exposure measure by the amount of margin they have received.

Article 429d

Additional provisions on the calculation of the exposure value of written credit derivatives

Institutions shall calculate the effective notional amount of written credit derivatives by adjusting the notional amount of those derivatives to reflect the true exposure of the contracts that are leveraged or otherwise enhanced by the structure of the transaction.

• (a) the remaining maturity of the purchased credit derivative is equal to or greater than the remaining maturity of the written credit derivative;

• (b) the purchased credit derivative is otherwise subject to the same or more conservative material terms as those in the corresponding written credit derivative;

• (c) the purchased credit derivative is not purchased from a counterparty that would expose the institution to Specific Wrong-Way risk, as defined in point (b) of Article 291(1);

• (d) where the effective notional amount of the written credit derivative is reduced by any negative change in fair value incorporated in the institution's Tier 1 capital, the effective notional amount of the purchased credit derivative is reduced by any positive fair value change that has been incorporated in Tier 1 capital;

• (e) the purchased credit derivative is not included in a transaction that has been cleared by the institution on behalf of a client or that has been cleared by the institution in its role as a higher-level client in a multi-level client structure and for which the effective notional amount referenced by the corresponding written credit derivative is excluded from the total exposure measure in accordance with point (g) or (h) of the first subparagraph of Article 429a(1), as applicable.

For the purpose of calculating the potential future exposure in accordance with Article 429c(1), institutions may exclude from the netting set the portion of a written credit derivative which is not offset in accordance with the first subparagraph of this paragraph and for which the effective notional amount is included in the total exposure measure.

6. Institutions shall not reduce the effective notional amount of written credit derivatives where they buy credit protection through a total return swap and record the net payments received as net income, but do not record any offsetting deterioration in the value of the written credit derivative in Tier 1 capital.

Article 429e

Counterparty credit risk add-on for securities financing transactions

Image omitted; see official source

where:

Image omitted; see official source	=	the add-on;
---	---	---
i	=	the index that denotes the transaction;
---	---	---
Ei	=	the fair value of securities or cash lent to the counterparty under transaction i; and
---	---	---
Ci	=	the fair value of securities or cash received from the counterparty under transaction i.

Institutions may set

Image omitted; see official source equal to zero where Ei is the cash lent to a counterparty and the associated cash receivable is not eligible for the netting treatment set out in Article 429b(4).

Image omitted; see official source

where:

Image omitted; see official source	=	the add-on;
---	---	---
i	=	the index that denotes the netting agreement;
---	---	---
Ei	=	the fair value of securities or cash lent to the counterparty for the transactions that are subject to master netting agreement i; and
---	---	---
Ci	=	the fair value of securities or cash received from the counterparty that is subject to master netting agreement i.

• (a) where the institution provides an indemnity or guarantee to one of the parties in the securities financing transaction and the indemnity or guarantee is limited to any difference between the value of the security or cash the party has lent and the value of collateral the borrower has provided, the institution shall only include the add-on calculated in accordance with paragraph 2 or 3, as applicable, in the total exposure measure;

• (b) where the institution does not provide an indemnity or guarantee to any of the involved parties, the transaction shall not be included in the total exposure measure;

- (c) where the institution is economically exposed to the underlying security or the cash in the transaction to an amount greater than the exposure covered by the add-on, it shall include in the total exposure measure also the full amount of the security or the cash to which it is exposed;

• (d) where the institution acting as agent provides an indemnity or guarantee to both parties involved in a securities financing transaction, the institution shall calculate its total exposure measure in accordance with points (a), (b) and (c) separately for each party involved in the transaction.

Article 429f

Calculation of the exposure value of off-balance-sheet items

Where a commitment refers to the extension of another off-balance-sheet item, Article 111(3) shall apply.

2. By way of derogation from paragraph 1, institutions may reduce the credit exposure equivalent amount of an off-balance-sheet item by the corresponding amount of specific credit risk adjustments. The calculation shall be subject to a floor of zero.