Article 325b

Permission for consolidated requirements

(a) there is a satisfactory allocation of own funds within the group; (b) the regulatory, legal or contractual framework in which the institutions operate guarantees mutual financial support within the group.

(a) such undertakings have been authorised in a third country and either satisfy the definition of a credit institution or are recognised third-country investment firms; (b) on an individual basis, such undertakings comply with own funds requirements equivalent to those laid down in this Regulation; (c) no regulations exist in the third countries in question which might significantly affect the transfer of funds within the group.’;

(90) in Title IV of Part Three, the following Chapters are inserted: ‘CHAPTER 1a Alternative standardised approach Section 1 General provisions

Article 325c

Scope and structure of the alternative standardised approach

(a) the own funds requirement under the sensitivities-based method set out in Section 2; (b) the own funds requirement for the default risk set out in Section 5 which is only applicable to the trading book positions referred to in that Section; (c) the own funds requirement for residual risks set out in Section 4 which is only applicable to the trading book positions referred to in that Section. Section 2 Sensitivities-based method for calculating the own funds requirement

Article 325d

Definitions For the purposes of this Chapter, the following definitions apply: (1) ‘risk class’ means one of the following seven categories: (i) general interest rate risk; (ii) credit spread risk (CSR) for non-securitisation; (iii) credit spread risk for securitisation not included in the alternative correlation trading portfolio (non-ACTP CSR); (iv) credit spread risk for securitisation included in the alternative correlation trading portfolio (ACTP CSR); (v) equity risk; (vi) commodity risk; (vii) foreign exchange risk; (2) ‘sensitivity’ means the relative change in the value of a position, as a result of a change in the value of one of the relevant risk factors of the position, calculated with the institution's pricing model in accordance with Subsection 2 of Section 3; (3) ‘bucket’ means a sub-category of positions within one risk class with a similar risk profile to which a risk weight as defined in Subsection 1 of Section 3 is assigned.

Article 325e

Components of the sensitivities-based method

(a) own funds requirements for delta risk which capture the risk of changes in the value of an instrument due to movements in its non-volatility related risk factors; (b) own funds requirements for vega risk which capture the risk of changes in the value of an instrument due to movements in its volatility-related risk factors; (c) own funds requirements for curvature risk which capture the risk of changes in the value of an instrument due to movements in the main non-volatility related risk factors not captured by the own funds requirements for delta risk.

(a) all the positions of instruments with optionality shall be subject to the own funds requirements referred to in points (a), (b) and (c) of paragraph 1; (b) all the positions of instruments without optionality shall only be subject to the own funds requirements referred to in point (a) of paragraph 1. For the purposes of this Chapter, instruments with optionality include, among others: calls, puts, caps, floors, swap options, barrier options and exotic options. Embedded options, such as prepayment or behavioural options, shall be considered to be stand-alone positions in options for the purpose of calculating the own funds requirements for market risk. For the purposes of this Chapter, instruments whose cash flows can be written as a linear function of the underlying's notional amount shall be considered to be instruments without optionality.

Article 325f

Own funds requirements for delta and vega risks

WSk = RWk · sk where: WSk = the weighted sensitivities; RWk = the risk weights; and sk = the risk factor.

where: Kb = the bucket-specific sensitivity; and WS = the weighted sensitivities.

where:

Sb

Σk WSk for all risk factors in bucket b and Sc = Σk WSk in bucket c; where those values for Sb and Sc produce a negative number for the overall sum of , the institution shall calculate the risk-class specific own funds requirements for delta or vega risk using an alternative specification whereby

Sb

max [min (Σk WSk, Kb), – Kb] for all risk factors in bucket b and Sc = max [min (Σk WSk, Kc), – Kc] for all risk factors in bucket c. The risk-class specific own funds requirements for delta or vega risk shall be calculated for each risk class in accordance with paragraphs 1 to 8.

Article 325g

Own funds requirements for curvature risk Institutions shall calculate the own funds requirements for curvature risk in accordance with the delegated act referred to in Article 461a.

Article 325h

Aggregation of risk-class specific own funds requirements for delta, vega and curvature risks

(a) the medium correlations scenario, whereby the correlation parameters ρkl and γbc remain unchanged from those specified in Section 6; (b) the high correlations scenario, whereby the correlation parameters ρkl and γbc that are specified in Section 6 shall be uniformly multiplied by 1,25, with ρkl and γbc subject to a cap at 100 %; (c) the low correlations scenario shall be specified in the delegated act referred to in Article 461a.

Article 325i

Treatment of index instruments and multi-underlying options Institutions shall treat the index instruments and multi-underlying options in accordance with the delegated act referred to in Article 461a.

Article 325j

Treatment of collective investment undertakings Institutions shall treat the collective investment undertakings in accordance with the delegated act referred to in Article 461a.

Article 325k

Underwriting positions

Table 1

Business day 0 0 % Business day 1 10 % Business days 2 and 3 25 % Business day 4 50 % Business day 5 75 % After business day 5 100 % For the purposes of this Article, ‘business day 0’ means the business day on which the institution becomes unconditionally committed to accepting a known quantity of securities at an agreed price.

Section 3 Risk factor and sensitivity definitions Subsection 1 Risk factor definitions

Article 325l

General interest rate risk factors

The delta general interest rate risk factors applicable to interest rate-sensitive instruments shall be the relevant risk-free rates per currency and per each of the following maturities: 0,25 years, 0,5 years, 1 year, 2 years, 3 years, 5 years, 10 years, 15 years, 20 years, 30 years. Institutions shall assign risk factors to the specified vertices by linear interpolation or by using a method that is most consistent with the pricing functions used by the independent risk control function of the institution to report market risk or profits and losses to senior management.

Where the data on market-implied swap curves described in paragraph 2 and the first subparagraph of this paragraph are insufficient, the risk-free rates may be derived from the most appropriate sovereign bond curve for a given currency. Where institutions use the general interest rate risk factors derived in accordance with the procedure set out in the second subparagraph of this paragraph for sovereign debt instruments, the sovereign debt instrument shall not be exempted from the own funds requirements for credit spread risk. In those cases, where it is not possible to disentangle the risk-free rate from the credit spread component, the sensitivity to the risk factor shall be allocated both to the general interest rate risk and to credit spread risk classes.

Institutions shall apply additional risk factors for inflation risk to debt instruments whose cash flows are functionally dependent on inflation rates. Those additional risk factors shall consist of one vector of market-implied inflation rates of different maturities per currency. For each instrument, the vector shall contain as many components as there are inflation rates used as variables by the institution's pricing model for that instrument.

Each cross-currency basis risk factor shall consist of one vector of cross-currency basis of different maturities per currency. For each debt instrument, the vector shall contain as many components as there are cross-currency bases used as variables by the institution's pricing model for that instrument. Each currency shall constitute a different bucket. Institutions shall calculate the sensitivity of the instrument to the cross-currency basis risk factor as the change in the value of the instrument, according to its pricing model, as a result of a 1 basis point shift in each of the components of the vector. Each currency shall constitute a separate bucket. Within each bucket there shall be two possible distinct risk factors: basis over euro and basis over US dollar, regardless of the number of components there are in each cross-currency basis vector. The maximum number of net sensitivities per bucket shall be two.

For netting purposes, institutions shall consider implied volatilities linked to the same risk-free rates and mapped to the same maturities to constitute the same risk factor. Where institutions map implied volatilities to the maturities as referred to in this paragraph, the following requirements shall apply: (a) where the maturity of the option is aligned with the maturity of the underlying, a single risk factor shall be considered, which shall be mapped to that maturity; (b) where the maturity of the option is shorter than the maturity of the underlying, the following risk factors shall be considered as follows: (i) the first risk factor shall be mapped to the maturity of the option; (ii) the second risk factor shall be mapped to the residual maturity of the underlying of the option at the expiry date of the option.

There shall be no curvature risk own funds requirements for inflation and cross currency basis risks.

Article 325m

Credit spread risk factors for non-securitisation

Article 325n

Credit spread risk factors for securitisation

Institutions shall apply the credit spread risk factors referred to in paragraph 5 to securitisation positions that are not included in the ACTP, as referred to in Article 325(6), (7) and (8).

The buckets applicable to the credit spread risk for securitisations that are not included in the ACTP shall be specific to that risk-class category, as referred to in Section 6.

(a) the delta risk factors shall be all the relevant credit spread rates of the issuers of the underlying exposures of the securitisation position, inferred from the relevant debt instruments and credit default swaps, and for each of the following maturities: 0,5 years, 1 year, 3 years, 5 years, 10 years. (b) the vega risk factors applicable to options with securitisation positions that are included in the ACTP as underlyings shall be the implied volatilities of the credit spreads of the issuers of the underlying exposures of the securitisation position, inferred as described in point (a) of this paragraph, which shall be mapped to the following maturities in accordance with the maturity of the corresponding option subject to own funds requirements: 0,5 years, 1 year, 3 years, 5 years, 10 years. (c) the curvature risk factors shall be the relevant credit spread yield curves of the issuers of the underlying exposures of the securitisation position expressed as a vector of credit spread rates for different maturities, inferred as indicated in point (a) of this paragraph; for each instrument, the vector shall contain as many components as there are different maturities of credit spread rates that are used as variables by the institution's pricing model for that instrument.

(a) the delta risk factors shall be the relevant tranche credit spread rates, mapped to the following maturities, in accordance with the maturity of the tranche: 0,5 years, 1 year, 3 years, 5 years, 10 years; (b) the vega risk factors applicable to options with securitisation positions that are not included in the ACTP as underlyings shall be the implied volatilities of the credit spreads of the tranches, each of them mapped to the following maturities in accordance with the maturity of the option subject to own funds requirements: 0,5 years, 1 year, 3 years, 5 years, 10 years; (c) the curvature risk factors shall be the same as those described in point (a) of this paragraph; to all those risk factors, a common risk weight shall be applied, as referred to in Section 6.

Article 325o

Equity risk factors

For the purposes of equity risk, a specific equity repo curve shall constitute a single risk factor, which is expressed as a vector of repo rates for different maturities. For each instrument, the vector shall contain as many components as there are different maturities of repo rates that are used as variables by the institution's pricing model for that instrument. Institutions shall calculate the sensitivity of an instrument to an equity risk factor as the change in the value of the instrument, according to its pricing model, as a result of a 1 basis point shift in each of the components of the vector. Institutions shall offset sensitivities to the repo rate risk factor of the same equity security, regardless of the number of components of each vector.

Article 325p

Commodity risk factors

The sensitivity of the instrument to each risk factor used in the curvature risk formula shall be calculated as specified in Article 325g. For the purposes of curvature risk, institutions shall consider vectors having a different number of components to constitute the same risk factor, provided that those vectors correspond to the same commodity type.

Article 325q

Foreign exchange risk factors

Subsection 2 Sensitivity definitions

Article 325r

Delta risk sensitivities

(a) the sensitivities to risk factors consisting of risk-free rates shall be calculated as follows:

where:

= the sensitivities to risk factors consisting of risk-free rates; rkt = the rate of a risk-free curve k with maturity t; Vi (.) = the pricing function of instrument i; and x,y = risk factors other than rkt in the pricing function Vi; (b) the sensitivities to risk factors consisting of inflation risk and cross-currency basis shall be calculated as follows:

where:

the sensitivities to risk factors consisting of inflation risk and cross-currency basis;

a vector of m components representing the implied inflation curve or the cross-currency basis curve for a given currency j with m being equal to the number of inflation or cross-currency related variables used in the pricing model of instrument i;

the unity matrix of dimension (1 × m); Vi (.) = the pricing function of the instrument i; and y, z = other variables in the pricing model.

where:

the delta credit spread risk sensitivities for all securitisation and non-securitisation positions; cskt = the value of the credit spread rate of an issuer j at maturity t; Vi (.) = the pricing function of instrument i; and x,y = risk factors other than cskt in the pricing function Vi.

(a) the sensitivities to risk factors consisting of equity spot prices shall be calculated as follows:

where: sk = the sensitivities to risk factors consisting of equity spot prices; k = a specific equity security; EQk = the value of the spot price of that equity security; Vi (.) = the pricing function of instrument i; and x,y = risk factors other than EQk in the pricing function Vi; (b) the sensitivities to risk factors consisting of equity repo rates shall be calculated as follows:

where:

the sensitivities to risk factors consisting of equity repo rates; k = the index that denotes the equity; = a vector of m components representing the repo term structure for a specific equity k with m being equal to the number of repo rates corresponding to different maturities used in the pricing model of instrument i; = the unity matrix of dimension (1 · m); Vi (.) = the pricing function of the instrument i; and y,z = risk factors other than

in the pricing function Vi.

where: sk = the delta commodity risk sensitivities; k = a given commodity risk factor; CTYk = the value of risk factor k;

Vi (.)

the pricing function of instrument i; and

y, z

risk factors other than CTYk in the pricing model of instrument i.

where: sk = the delta foreign exchange risk sensitivities; k = a given foreign exchange risk factor; FXk = the value of the risk factor;

Vi (.)

the pricing function of instrument i; and

y, z

risk factors other than FXk in the pricing model of instrument i.

Article 325s

Vega risk sensitivities

where: sk = the vega risk sensitivity of an option; k = a specific vega risk factor, consisting of an implied volatility; volk = the value of that risk factor, which should be expressed as a percentage; and x,y = risk factors other than volk in the pricing function Vi.

Article 325t

Requirements on sensitivity computations

By way of derogation from the first subparagraph, competent authorities may require an institution that has been granted permission to use the alternative internal model approach set out in Chapter 1b to use the pricing functions of the risk-measurement system of their internal model approach in the calculation of sensitivities under this Chapter for the calculation and reporting of the own funds requirements for market risk in accordance with Article 430b(3).

(a) for general interest rate risk and credit spread risk, institutions shall assume, for each currency, that the underlying of the volatility risk factors for which vega risk is calculated follows either a lognormal or normal distribution in the pricing models used for those instruments; (b) for equity risk, commodity risk and foreign exchange risk, institutions shall assume that the underlying of the volatility risk factors for which vega risk is calculated follows a lognormal distribution in the pricing models used for those instruments.

(a) those alternative definitions are used for internal risk management purposes and for the reporting of profits and losses to senior management by an independent risk control unit within the institution; (b) the institution demonstrates that those alternative definitions are more appropriate for capturing the sensitivities for the position than are the formulas set out in this Subsection, and that the resulting sensitivities do not materially differ from those formulas.

(a) those alternative definitions are used for internal risk management purposes and for the reporting of profits and losses to senior management by an independent risk control unit within the institution; (b) the institution demonstrates that those alternative definitions are more appropriate for capturing the sensitivities for the position than are the formulas set out in this Subsection, and that the linear transformation referred to in the first subparagraph reflects a vega risk sensitivity. Section 4 The residual risk add-on

Article 325u

Own funds requirements for residual risks

(a) the instrument references an exotic underlying, which, for the purposes of this Chapter, means a trading book instrument referencing an underlying exposure that is not in the scope of the delta, vega or curvature risk treatments under the sensitivities-based method laid down in Section 2 or the own funds requirements for the default risk set out in Section 5; (b) the instrument is an instrument bearing other residual risks, which, for the purposes of this Chapter, means any of the following instruments: (i) instruments that are subject to the own funds requirements for vega and curvature risk under the sensitivities-based method set out in Section 2 and that generate pay-offs that cannot be replicated as a finite linear combination of plain-vanilla options with a single underlying equity price, commodity price, exchange rate, bond price, credit default swap price or interest rate swap; (ii) instruments that are positions that are included in the ACTP referred to in Article 325(6); hedges that are included in that ACTP, as referred to in Article 325(8), shall not be considered.

(a) 1,0 % in the case of instruments referred to in point (a) of paragraph 2; (b) 0,1 % in the case of instruments referred to in point (b) of paragraph 2.

(a) the instrument is listed on a recognised exchange; (b) the instrument is eligible for central clearing in accordance with Regulation (EU) No 648/2012; (c) the instrument perfectly offsets the market risk of another position in the trading book, in which case the two perfectly matching trading book positions shall be exempted from the own funds requirement for residual risks.

When developing those draft regulatory technical standards, EBA shall examine whether longevity risk, weather, natural disasters and future realised volatility should be considered as exotic underlyings. EBA shall submit those draft regulatory technical standards to the Commission by 28 June 2021. Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010. Section 5 Own funds requirements for the default risk

Article 325v

Definitions and general provisions

(a) ‘short exposure’ means that the default of an issuer or group of issuers leads to a gain for the institution, regardless of the type of instrument or transaction creating the exposure; (b) ‘long exposure’ means that the default of an issuer or group of issuers leads to a loss for the institution, regardless of the type of instrument or transaction creating the exposure; (c) ‘gross jump-to-default (gross JTD) amount’ means the estimated size of the loss or gain that the default of the obligor would produce for a specific exposure; (d) ‘net jump-to-default (net JTD) amount’ means the estimated size of the loss or gain that an institution would incur due to the default of an obligor, after offsetting between gross JTD amounts has taken place, (e) ‘loss given default’ or ‘LGD’ means the loss given default of the obligor on an instrument issued by that obligor expressed as a share of the notional amount of the instrument; (f) ‘default risk weight’ means the percentage representing the estimated probability of the default of each obligor, according to the creditworthiness of that obligor.

Subsection 1 Own funds requirements for the default risk for non-securitisations

Article 325w

Gross jump-to-default amounts

JTDlong = max {LGD Vnotional + P&Llong + Adjustmentlong; 0} where: JTDlong = the gross JTD amount for the long exposure;

Vnotional

the notional amount of the instrument from which the exposure arises; P&Llong = a term which adjusts for gains or losses already accounted for by the institution due to changes in the fair value of the instrument creating the long exposure; gains shall enter into the formula with a positive sign and losses shall enter into the formula with a negative sign; and Adjustmentlong = where the instrument from which the exposure arises is a derivative instrument, the amount by which, due to the structure of the derivative instrument, the institution's loss in the event of default would be increased or reduced relative to the full loss on the underlying instrument; increases shall enter into the formula with a positive sign and decreases shall enter into the formula with a negative sign.

JTDshort = min {LGD Vnotional + P&Lshort + Adjustmentshort; 0} where: JTDshort = the gross JTD amount for the short exposure;

Vnotional

the notional amount of the instrument from which the exposure arises that shall enter into the formula with a negative sign; P&Lshort = a term which adjusts for gains or losses already accounted for by the institution due to changes in the fair value of the instrument creating the short exposure; gains shall enter into the formula with a positive sign and losses shall enter into the formula with a negative sign; and Adjustmentshort = where the instrument from which the exposure arises is a derivative instrument, the amount by which, due to the structure of the derivative instrument, the institution's gain in the event of default would be increased or reduced relative to the full loss on the underlying instrument; decreases shall enter into the formula with a positive sign and increases shall enter into the formula with a negative sign.

(a) exposures to non-senior debt instruments shall be assigned an LGD of 100 %; (b) exposures to senior debt instruments shall be assigned an LGD of 75 %; (c) exposures to covered bonds, as referred to in Article 129, shall be assigned an LGD of 25 %.

(a) in the case of a bond, the notional amount is the face value of the bond; (b) in the case of a sold put option on a bond, the notional amount is the notional amount of the option; in the case of a bought call option on a bond, the notional amount is 0.

JTDlong = max {LGD · Vnotional + P&Llong + Adjustmentlong; 0} JTDshort = min {LGD · Vnotional + P&Lshort + Adjustmentshort; 0} where: JTDlong = the gross JTD amount for the long exposure; Vnotional = the notional amount of the instrument from which the exposure arises; the notional amount is the fair value of the equity for cash equity instruments; for the JTDshort formula, the notional amount of the instrument shall enter into the formula with a negative sign; P&Llong = a term which adjusts for gains or losses already accounted for by the institution due to changes in the fair value of the instrument creating the long exposure; gains shall enter into the formula with a positive sign and losses shall enter into the formula with a negative sign; Adjustmentlong = the amount by which, due to the structure of the derivative instrument, the institution's loss in the event of default would be increased or reduced relative to the full loss on the underlying instrument; increases shall enter into the formula with a positive sign and decreases shall enter into the formula with a negative sign; JTDshort = the gross JTD amount for the short exposure; P&Lshort = a term which adjusts for gains or losses already accounted for by the institution due to changes in the fair value of the instrument creating the short exposure; gains shall enter into the formula with a positive sign and losses shall enter into the formula with a negative sign; and Adjustmentshort = the amount by which, due to the structure of the derivative instrument, the institution's gain in the event of default would be increased or reduced relative to the full loss on the underlying instrument; decreases shall enter into the formula with a positive sign and increases shall enter into the formula with a negative sign.

(a) how institutions are to determine the components P&Llong, P&Lshort, Adjustmentlong and Adjustmentshort when calculating the JTD amounts for different types of instruments in accordance with this Article;

(b) which alternative methodologies institutions are to use for the purposes of the estimation of gross JTD amounts referred to in paragraph 7. (c) the notional amounts of instruments other than the ones referred to in points (a) and (b) of paragraph 4. EBA shall submit those draft regulatory technical standards to the Commission by 28 June 2021. Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.

Article 325x

Net jump-to-default amounts

(a) offsetting shall be full where all offsetting exposures have maturities of one year or more; (b) offsetting shall be partial where at least one of the offsetting exposures has a maturity of less than one year, in which case the size of the JTD amount of each exposure with a maturity of less than one year shall be multiplied by the ratio of the exposure's maturity relative to one year.

Article 325y

Calculation of the own funds requirements for the default risk

Table 2 Credit quality category Default risk weight Credit quality step 1 0,5 % Credit quality step 2 3 % Credit quality step 3 6 % Credit quality step 4 15 % Credit quality step 5 30 % Credit quality step 6 50 % Unrated 15 % Defaulted 100 %

DRCb = max {(Σi ∈ long RWi · net JTDi) – WtS · (Σi ∈ short RWi · |net JTDi|); 0} where: DRCb = the own funds requirement for the default risk for bucket b; i = the index that denotes an instrument belonging to bucket b; RWi = the risk weight; and WtS = a ratio recognising a benefit for hedging relationships within a bucket, which shall be calculated as follows: For the purposes of calculating the DRCb and the WtS, the long positions and short positions shall be aggregated for all positions within a bucket, regardless of the credit quality step to which those positions are allocated, to produce the bucket-specific own funds requirements for the default risk.

Subsection 2 Own funds requirements for the default risk for securitisations not included in the ACTP

Article 325z

Jump-to-default amounts

Article 325aa

Calculation of the own funds requirement for the default risk for securitisations

(a) one common bucket for all corporates, regardless of the region; (b) 44 different buckets corresponding to one bucket per region for each of the 11 asset classes defined in the second subparagraph. For the purposes of the first subparagraph, the 11 asset classes are ABCP, auto loans/leases, residential mortgage-backed securities (RMBS), credit cards, commercial mortgage-backed securities (CMBS), collateralised loan obligations, collateralised debt obligations squared (CDO-squared), small and medium-sized enterprises (SMEs), student loans, other retail, other wholesale. The four regions are Asia, Europe, North America, and rest of the world.

Subsection 3 Own funds requirements for the default risk for securitisations included in the ACTP

Article 325ab

Scope

Article 325ac

Jump-to-default amounts for the ACTP

(a) ‘decomposition with a valuation model’ means that a single name constituent of a securitisation is valued as the difference between the unconditional value of the securitisation and the conditional value of the securitisation assuming that single name defaults with an LGD of 100 %; (b) ‘replication’ means that the combination of individual securitisation index tranches are combined to replicate another tranche of the same index series, or to replicate an untranched position in the index series; (c) ‘decomposition’ means replicating an index by a securitisation of which the underlying exposures in the pool are identical to the single name exposures that compose the index.

(a) attachment point = (N – 1) / Total Names; (b) detachment point = N / Total Names; where ‘Total Names’ shall be the total number of names in the underlying basket or pool.

(a) for indices, index tranches and bespoke tranches, offsetting shall be possible across maturities within the same index family, series and tranche, subject to the provisions on exposures of less than one year laid down in Article 325x; long gross JTD amounts and short gross JTD amounts that perfectly replicate each other may be offset through decomposition into single name equivalent exposures using a valuation model; in such cases, the sum of the gross JTD amounts of the single name equivalent exposures obtained through decomposition shall be equal to the gross JTD amount of the undecomposed exposure; (b) offsetting through decomposition as set out is point (a) shall not be allowed for resecuritisations or derivatives on securitisation; (c) for indices and index tranches, offsetting shall be possible across maturities within the same index family, series and tranche by replication or by decomposition; where the long exposures and short exposures are otherwise equivalent, apart from one residual component, offsetting shall be allowed and the net JTD amount shall reflect the residual exposure; (d) different tranches of the same index series, different series of the same index and different index families may not be used to offset each other.

Article 325ad

Calculation of the own funds requirements for the default risk for the ACTP

(a) for tranched products, the default risk weights corresponding to their credit quality as specified in Article 325y(1) and (2); (b) for non-tranched products, the default risk weights referred to in Article 325aa(1).

DRCb = max {(Σi ∈ long RWi · net JTDi) – WtSACTP · (Σi ∈ short RWi · |net JTDi|); 0} where: DRCb = the own funds requirement for the default risk for bucket b; i = an instrument belonging to bucket b; and WtSACTP = the ratio recognising a benefit for hedging relationships within a bucket, which shall be calculated in accordance with the WtS formula set out in Article 325y(4), but using long positions and short positions across the entire ACTP and not just the positions in the particular bucket.

where: DRCACTP = the own funds requirement for the default risk for the ACTP; and DRCb = the own funds requirement for the default risk for bucket b. Section 6 Risk weights and correlations Subsection 1 Delta risk weights and correlations

Article 325ae

Risk weights for general interest rate risk

Table 3 Bucket Maturity 1 0,25 years 2 0,5 years 3 1 year 4 2 years 5 3 years 6 5 years 7 10 years 8 15 years 9 20 years 10 30 years

Article 325af

Intra bucket correlations for general interest rate risk

where: Tk (respectivelyTl) = the maturity that relates to the risk free rate; θ = 3 %

Article 325ag

Correlations across buckets for general interest rate risk

Article 325ah

Risk weights for credit spread risk for non-securitisations

Table 4 Bucket number Credit quality Sector Risk weight (percentage points) 1 All Central government, including central banks, of a Member State 0,50 % 2 Credit quality step 1 to 3 Central government, including central banks, of a third country, multilateral development banks and international organisations referred to in Article 117(2) or Article 118 0,5 % 3 Regional or local authority and public sector entities 1,0 % 4 Financial sector entities including credit institutions incorporated or established by a central government, a regional government or a local authority and promotional lenders 5,0 % 5 Basic materials, energy, industrials, agriculture, manufacturing, mining and quarrying 3,0 % 6 Consumer goods and services, transportation and storage, administrative and support service activities 3,0 % 7 Technology, telecommunications 2,0 % 8 Health care, utilities, professional and technical activities 1,5 % 9 Covered bonds issued by credit institutions in Member States 1,0 % 11 Credit quality step 4 to 6 Central government, including central banks, of a third country, multilateral development banks and international organisations referred to in Article 117(2) or Article 118 12 Regional or local authority and public sector entities 4,0 % 13 Financial sector entities including credit institutions incorporated or established by a central government, a regional government or a local authority and promotional lenders 12,0 % 14 Basic materials, energy, industrials, agriculture, manufacturing, mining and quarrying 7,0 % 15 Consumer goods and services, transportation and storage, administrative and support service activities 8,5 % 16 Technology, telecommunications 5,5 % 17 Health care, utilities, professional and technical activities 5,0 % 18 Other sector 12,0 %

Article 325ai

Intra-bucket correlations for credit spread risk for non-securitisations

l between two sensitivities WSk and WSl within the same bucket shall be set as follows: ρkl = ρkl ^(name) · ρkl ^(tenor) · ρkl ^(basis) where: ρkl ^(name) shall be equal to 1 where the two names of sensitivities k and l are identical, otherwise it shall be equal to 35 %; ρkl ^(tenor) shall be equal to 1 where the two vertices of the sensitivities k and l are identical, otherwise it shall be equal to 65 %; and ρkl ^(basis) shall be equal to 1 where the two sensitivities are related to the same curves, otherwise it shall be equal to 99,90 %.

Article 325aj

Correlations across buckets for credit spread risk for non-securitisations The correlation parameter γbc that applies to the aggregation of sensitivities between different buckets shall be set as follows: γbc = γbc ^(rating) · γbc ^(sector) where: γbc ^(rating) shall be equal to 1 where the two buckets have the same credit quality category (either credit quality step 1 to 3 or credit quality step 4 to 6), otherwise it shall be equal to 50 %; for the purposes of that calculation, bucket 1 shall be considered as belonging to the same credit quality category as buckets that have credit quality step 1 to 3; and γbc ^(sector) shall be equal to 1 where the two buckets belong to the same sector, and otherwise shall be equal to the corresponding percentage set out in Table 5: Table 5 Bucket 1, 2 and 11 3 and 12 4 and 13 5 and 14 6 and 15 7 and 16 8 and 17 9 1, 2 and 11

75 %

10 % 20 % 25 % 20 % 15 % 10 % 3 and 12

5 % 15 % 20 % 15 % 10 % 10 % 4 and 13

5 % 15 % 20 % 5 % 20 % 5 and 14

20 % 25 % 5 % 5 % 6 and 15

25 % 5 % 15 % 7 and 16

5 % 20 % 8 and 17

5 % 9 —

Article 325ak

Risk weights for credit spread risk for securitisations included in the ACTP Risk weights for the sensitivities to credit spread risk factors for securitisations included in the ACTP risk factors shall be the same for all maturities (0,5 years, 1 year, 3 years, 5 years, 10 years) within each bucket and shall be specified for each bucket in Table 6 pursuant to the delegated act referred to in Article 461a: Table 6 Bucket number Credit quality Sector 1 All Central government, including central banks, of Member States 2 Credit quality step 1 to 3 Central government, including central banks, of a third country, multilateral development banks and international organisations referred to in Article 117(2) or Article 118 3 Regional or local authority and public sector entities 4 Financial sector entities including credit institutions incorporated or established by a central government, a regional government or a local authority and promotional lenders 5 Basic materials, energy, industrials, agriculture, manufacturing, mining and quarrying 6 Consumer goods and services, transportation and storage, administrative and support service activities 7 Technology, telecommunications 8 Health care, utilities, professional and technical activities 9 Covered bonds issued by credit institutions in Member States 10 Covered bonds issued by credit institutions in third countries 11 Credit quality step 4 to 6 Central government, including central banks, of a third country, multilateral development banks and international organisations referred to in Article 117(2) or Article 118 12 Regional or local authority and public sector entities 13 Financial sector entities including credit institutions incorporated or established by a central government, a regional government or a local authority and promotional lenders 14 Basic materials, energy, industrials, agriculture, manufacturing, mining and quarrying 15 Consumer goods and services, transportation and storage, administrative and support service activities 16 Technology, telecommunications 17 Health care, utilities, professional and technical activities 18 Other sector

Article 325al

Correlations for credit spread risk for securitisations included in the ACTP

l shall be derived in accordance with Article 325ai, except that, for the purposes of this paragraph, ρk l ^(basis) shall be equal to 1 where the two sensitivities are related to the same curves, otherwise it shall be equal to 99,00 %.

c shall be derived in accordance with Article 325aj.

Article 325am

Risk weights for credit spread risk for securitisations not included in the ACTP

Table 7 Bucket number Credit quality Sector 1 Senior and Credit quality step 1 to 3 RMBS - Prime 2 RMBS - Mid-Prime 3 RMBS - Sub-Prime 4 CMBS 5 Asset backed securities (ABS) - Student loans 6 ABS - Credit cards 7 ABS - Auto 8 Collateralised loan obligations (CLO) non-ACTP 9 Non-senior and credit quality step 1 to 3 RMBS - Prime 10 RMBS - Mid-Prime 11 RMBS - Sub-Prime 12 CMBS 13 ABS - Student loans 14 ABS - Credit cards 15 ABS - Auto 16 CLO non-ACTP 17 Credit quality step 4 to 6 RMBS - Prime 18 RMBS - Mid-Prime 19 RMBS - Sub-Prime 20 CMBS 21 ABS - Student loans 22 ABS - Credit cards 23 ABS - Auto 24 CLO non-ACTP 25 Other sector

Article 325an

Intra-bucket correlations for credit spread risk for securitisations not included in the ACTP

l shall be set as follows: ρkl = ρkl ^(tranche) · ρkl ^(tenor) · ρkl ^(basis) where: ρkl ^(tranche) shall be equal to 1 where the two names of sensitivities k and l are within the same bucket and are related to the same securitisation tranche (more than 80 % overlap in notional terms), otherwise it shall be equal to 40 %;

ρkl ^(tenor) shall be equal to 1 where the two vertices of the sensitivities k and l are identical, otherwise it shall be equal to 80 %; and ρkl ^(basis) shall be equal to 1 where the two sensitivities are related to the same curves, otherwise it shall be equal to 99,90 %.

Article 325ao

Correlations across buckets for credit spread risk for securitisations not included in the ACTP

c shall apply to the aggregation of sensitivities between different buckets and shall be set at 0 %.

Article 325ap

Risk weights for equity risk

Table 8 Bucket number Market capitalisation Economy Sector 1 Large Emerging market economy Consumer goods and services, transportation and storage, administrative and support service activities, healthcare, utilities 2 Telecommunications, industrials 3 Basic materials, energy, agriculture, manufacturing, mining and quarrying 4 Financials including government-backed financials, real estate activities, technology 5 Advanced economy Consumer goods and services, transportation and storage, administrative and support service activities, healthcare, utilities 6 Telecommunications, industrials 7 Basic materials, energy, agriculture, manufacturing, mining and quarrying 8 Financials including government-backed financials, real estate activities, technology 9 Small Emerging market economy All sectors described under bucket numbers 1, 2, 3 and 4 10 Advanced economy All sectors described under bucket numbers 5, 6, 7 and 8 11 Other sector

EBA shall submit those draft regulatory technical standards to the Commission by 28 June 2021. Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.

Article 325aq

Intra-bucket correlations for equity risk

(a) 15 % between two sensitivities within the same bucket that fall under the category large market capitalisation, emerging market economy (bucket number 1, 2, 3 or 4); (b) 25 % between two sensitivities within the same bucket that fall under the category large market capitalisation, advanced economy (bucket number 5, 6, 7 or 8); (c) 7,5 % between two sensitivities within the same bucket that fall under the category small market capitalisation, emerging market economy (bucket number 9); (d) 12,5 % between two sensitivities within the same bucket that fall under the category small market capitalisation, advanced economy (bucket number 10).

Article 325ar

Correlations across buckets for equity risk The correlation parameter γb c shall apply to the aggregation of sensitivities between different buckets. It shall be set at 15 % where the two buckets fall within buckets 1 to 10.

Article 325as