Commission Delegated Regulation (EU) 2023/511 of 24 November 2022 supplementing Regulation (EU) No 575/2013 of the European Parliament and of the Council with regard to regulatory technical standards for the calculation of risk-weighted exposure amounts of collective investment undertakings under the mandate-based approach (Text with EEA relevance)

THE EUROPEAN COMMISSION,

Having regard to the Treaty on the Functioning of the European Union,

Having regard to Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and amending Regulation (EU) No 648/2012 ¹, and in particular Article 132a(4), third subparagraph, thereof,

Whereas:

• (1) In order to avoid undue variability in capital requirements across institutions, and to make the mandate-based approach operational in situations where there is insufficient information, it is necessary to specify the method for calculating the risk-weighted exposure amount for a collective investment undertaking (CIU) under the mandate-based approach for the cases where missing inputs do not allow for the computation of the risk weighted exposure amount.

• (2) Where a CIU enters into derivative transactions and the underlyings of the derivatives or the underlying risk of the derivatives’ positions are unknown, the replacement cost of the positions cannot be determined by institutions, therefore neither can their exposure value. In that case, institutions should base their calculations on the notional amount of a derivative’s position, which would usually be known and would be the best indicator of the size of the position, therefore providing an approximation for the exposure value.

• (3) Where the CIU’s mandate does not exclude entering into derivatives but does not include sufficient information to determine whether an underlying constitutes an on- or off-balance sheet exposure, it cannot be excluded that such an exposure is constituted. It is therefore necessary to include that exposure in the calculation of the risk-weighted exposure amounts of the CIU’s exposures.

• (4) Where the mandate does not provide sufficient information about the exposure value of such position, it cannot be excluded that the exposure value is the full notional amount of the derivative position.

• (5) Where the mandate does not specify the notional amount of the derivative position, to ensure a sufficiently prudent approach, that amount should be derived from the maximum notional amount of derivatives allowed under the mandate.

• (6) Where the replacement costs or the potential future exposure for the purposes of calculating the exposure amount associated with counterparty credit risk are unknown, institutions should base their calculations on the sum of notional amounts of the transactions in the netting set, which would be the best available conservative estimate to allow for the use of the mandate-based approach.

• (7) There are cases in which it is not possible for institutions to ascertain the relevant netting sets for a certain type of derivative in the CIU, since there is no information available on the counterparties or on whether the transactions are subject to a legally enforceable bilateral netting arrangement referred to in Article 272, point (4), of Regulation (EU) No 575/2013. In those cases, institutions should assume that neither netting effects nor counterparty diversification exist for that type of derivative. Therefore, institutions should assume that the CIU has entered into a single derivative with the maximum notional amount allowed by the mandate for that type of derivative.

• (8) This Regulation is based on the draft regulatory technical standards submitted to the Commission by the European Banking Authority.

• (9) The European Banking Authority has conducted open public consultations on the draft regulatory technical standards on which this Regulation is based, analysed the potential related costs and benefits and requested the advice of the Banking Stakeholder Group established in accordance with Article 37 of Regulation (EU) No 1093/2010 of the European Parliament and of the Council ²,

HAS ADOPTED THIS REGULATION:

Article 1

Determination of the exposure value of a CIU’s derivatives’ positions where the underlying is unknown for the purposes of Article 132a(2) of Regulation (EU) No 575/2013

Article 2

Calculation of the exposure values for the counterparty credit risk of a netting set of a CIU’s derivatives’ positions

• (a) where the institution is not able to calculate the replacement cost of the netting set according to the relevant approach, due to missing inputs, that institution shall use the sum of notional amounts of all the derivatives in the netting set as the replacement cost;

• (b) where the institution is not able to calculate the potential future exposure of the netting set according to the relevant approach, due to missing inputs, that institution shall replace it by 0,15 times the sum of notional amounts of all the derivatives in the netting set.

Article 3

Entry into force

This Regulation shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union.

This Regulation shall be binding in its entirety and directly applicable in all Member States.

Done at Brussels, 24 November 2022.

For the Commission

The President

Ursula VON DER LEYEN