Article 325w
1.
Institutions shall calculate the gross JTD amounts for each long exposure to debt instruments as follows:
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. |
2.
Institutions shall calculate the gross JTD amounts for each short exposure to debt instruments as follows:
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. |
3.
For the purposes of the calculation set out in paragraphs 1 and 2, the LGD for debt instruments to be applied by institutions shall be the following:
4.
For the purposes of the calculations set out in paragraphs 1 and 2, notional amounts shall be determined as follows:
(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.
5.
For exposures to equity instruments, institutions shall calculate the gross JTD amounts as follows:
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. |
6.
Institutions shall assign an LGD of 100 % to equity instruments for the purposes of the calculation set out in paragraph 5.
7.
In the case of exposures to default risk arising from derivative instruments whose pay-offs in the event of default of the obligor are not related to the notional amount of a specific instrument issued by that obligor or to the LGD of the obligor or an instrument issued by that obligor, institutions shall use alternative methodologies to estimate the gross JTD amounts.
8.
EBA shall develop draft regulatory technical standards to specify:
(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.