EC published the Commission Delegated Regulation (EU) 2018/728 with respect to regulatory technical standards for procedures for excluding transactions with non-financial counterparties established in a third country from the own funds requirement for credit valuation adjustment (CVA) risk. Regulation 2018/728 supplements Capital Requirements Regulation (CRR or EU Regulation No 575/2013). This Regulation shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union.
Article 1 of the Regulation 2018/728 specifies that institutions shall consider as non-financial counterparties established in a third country, counterparties that meet both of the following conditions:
- They are established in a third country
- They would qualify as a non-financial counterparty within the meaning of point (9) of Article 2 of Regulation (EU) No 648/2012 [European Market Infrastructure Regulation or EMIR] if they were established in the Union
Institutions shall verify whether a counterparty is a non-financial counterparty established in a third country at trade inception when trading with a new counterparty; on an annual basis for existing counterparties; and where there is reason to believe that the counterparty is no longer a non-financial counterparty established in a third country. Institutions shall substantiate their opinion that an undertaking is a non-financial counterparty established in a third country.
Article 2 stipulates that, for excluding transactions with a non-financial counterparty established in a third country from the own funds requirements for CVA risk in accordance with point (a) of Article 382(4) of CRR, institutions shall verify, for each class of OTC derivative contracts referred to in Article 11 of Delegated Regulation (EU) No 149/2013, that the gross notional value of the OTC derivative contracts of that non-financial counterparty within that class does not exceed the relevant clearing threshold referred to in Article 11 of that Regulation. Institutions shall substantiate their opinion that, for each class of OTC derivatives contracts referred to in Article 11 of Delegated Regulation (EU) No 149/2013, the gross notional value of the OTC derivative contracts of a non-financial counterparty established in a third country, for that class, does not exceed the corresponding clearing threshold referred to in that Article. This regulation is based on the draft regulatory technical standards developed in cooperation with ESMA and submitted by EBA to EC. EBA has conducted open public consultations on the draft regulatory technical standards on which this regulation is based.
Effective Date: June 07, 2018
Keywords: Europe, EU, Banking, CRR, CVA Risk, OTC Derivatives, Regulatory Technical Standards, EC
Previous ArticleCPMI Publishes Strategy for Reducing Risk of Wholesale Payments
FSB finalized the toolkit of effective practices to assist financial institutions in their cyber incident response and recovery activities.
HKMA urged authorized institutions to take early action to adhere to the IBOR Fallbacks Protocol, which ISDA is expected to publish soon.
FSB published a global transition roadmap for London Inter-bank Offered Rate (LIBOR).
HM Treasury published a document that summarizes the responses received from a consultation on the approach of UK to transposition of the revised Bank Resolution and Recovery Directive (BRRD2).
HM Treasury published the government response to the feedback received on the consultation for updating the prudential regime of UK before the end of the Brexit transition period.
In a recent statistical notice, BoE announced publication of the reporting schedule for statistical returns for 2021.
EC welcomed the joint declaration by 25 EU member states on building the next generation of cloud in Europe.
MAS published amendments to Notice 648 on the issuance of covered bonds by banks incorporated in Singapore.
FDIC has selected 14 technology companies—including Accenture Federal Services, LLC, Fed Reporter, Inc, and S&P Global Market Intelligence, LLC—for inclusion in the next phase of the rapid prototyping competition.
GLEIF announced that financial institutions worldwide can realize a variety of cost, efficiency, and customer experience benefits by assuming a new “validation agent” role within the Global Legal Entity Identifier (LEI) System.