(1) Risk-weighted
assets for cleared transactions.
(i) To determine the
risk-weighted asset amount for a cleared transaction, a Board-regulated
institution that is a clearing member client must multiply the trade
exposure amount for the cleared transaction, calculated in accordance
with paragraph (b)(2) of this section, by the risk weight appropriate
for the cleared transaction, determined in accordance with paragraph
(b)(3) of this section.
(ii) A clearing member client Board-regulated institution’s
total risk-weighted assets for cleared transactions is the sum of
the risk-weighted asset amounts for all of its cleared transactions.
(2) Trade exposure amount.
(i) For
a cleared transaction that is a derivative contract or a netting set
of derivative contracts, trade exposure amount equals the EAD for
the derivative contract or netting set of derivative contracts calculated
using the methodology used to calculate EAD for derivative contracts
set forth in section 217.132(c) or (d), plus the fair value of the
collateral posted by the clearing member client Board-regulated institution
and held by the CCP or a clearing member in a manner that is not bankruptcy
remote. When the Board-regulated institution calculates EAD for the
cleared transaction using the methodology in section 217.132(d), EAD
equals EADunstressed.
(ii) For a cleared transaction that
is a repo-style transaction or netting set of repo-style transactions,
trade exposure amount equals the EAD for the repo-style transaction
calculated using the methodology set forth in section 217.132(b)(2)
or (3) or (d), plus the fair value of the collateral posted by the
clearing member client Board-regulated institution and held by the
CCP or a clearing member in a manner that is not bankruptcy remote.
When the Board-regulated institution calculates EAD for the cleared
transaction under section 217.132(d), EAD equals EADunstressed.
(3) Cleared transaction risk weights.
(i) For
a cleared transaction with a QCCP, a clearing member client Board-regulated
institution must apply a risk weight of:
(A) 2 percent if the collateral
posted by the Board-regulated institution to the QCCP or clearing
member is subject to an arrangement that prevents any loss to the
clearing member client Board-regulated institution due to the joint
default or a concurrent insolvency, liquidation, or receivership proceeding
of the clearing member and any other clearing member clients of the
clearing member; and the clearing member client Board-regulated institution
has conducted sufficient legal review to conclude with a well-founded
basis (and maintains sufficient written documentation of that legal
review) that in the event of a legal challenge (including one resulting
from an event of default or from liquidation, insolvency, or receivership
proceedings) the relevant court and administrative authorities would
find the arrangements to be legal, valid, binding, and enforceable
under the law of the relevant jurisdictions.
(B) 4 percent, if the requirements of paragraph
(b)(3)(i)(A) of this section are not met.
(ii) For a cleared transaction
with a CCP that is not a QCCP, a clearing member client Board-regulated
institution must apply the risk weight applicable to the CCP under
subpart D of this part.
(4) Collateral.
(i) Notwithstanding any other requirement
of this section, collateral posted by a clearing member client Board-regulated
institution that is held by a custodian (in its capacity as a custodian)
in a manner that is bankruptcy remote from the CCP, clearing member,
and other clearing member clients of the clearing member, is not subject
to a capital requirement under this section.
(ii) A clearing member client Board-regulated
institution must calculate a risk-weighted asset amount for any collateral
provided to a CCP, clearing member or a custodian in connection with
a cleared transaction in accordance with requirements under subparts
E or F of this part, as applicable.
(1) Risk-weighted
assets for cleared transactions.
(i) To determine the
risk-weighted asset amount for a cleared transaction, a clearing member
Board-regulated institution must multiply the trade exposure amount
for the cleared transaction, calculated in accordance with paragraph
(c)(2) of this section by the risk weight appropriate for the cleared
transaction, determined in accordance with paragraph (c)(3) of this
section.
(ii) A clearing
member Board-regulated institution’s total risk-weighted assets
for cleared transactions is the sum of the risk-weighted asset amounts
for all of its cleared transactions.
(2) Trade exposure
amount. A clearing member Board-regulated institution must calculate
its trade exposure amount for a cleared transaction as follows:
(i) For a cleared transaction that is a derivative contract or a
netting set of derivative contracts, trade exposure amount equals
the EAD calculated using the methodology used to calculate EAD for
derivative contracts set forth in section 217.132(c) or (d), plus
the fair value of the collateral posted by the clearing member Board-regulated
institution and held by the CCP in a manner that is not bankruptcy
remote. When the clearing member Board-regulated institution calculates
EAD for the cleared transaction using the methodology in section 217.132(d),
EAD equals EADunstressed.
(ii) For a cleared transaction that
is a repo-style transaction or netting set of repo-style transactions,
trade exposure amount equals the EAD calculated under section 217.132(b)(2)
or (3) or (d), plus the fair value of the collateral posted by the
clearing member Board-regulated institution and held by the CCP in
a manner that is not bankruptcy remote. When the clearing member Board-regulated
institution calculates EAD for the cleared transaction under section
217.132(d), EAD equals EADunstressed.
(3) Cleared transaction risk weights.
(i) A clearing member
Board-regulated institution must apply a risk weight of 2 percent
to the trade exposure amount for a cleared transaction with a QCCP.
(ii) For a cleared
transaction with a CCP that is not a QCCP, a clearing member Board-regulated
institution must apply the risk weight applicable to the CCP according
to subpart D of this part.
(iii) Notwithstanding paragraphs (c)(3)(i)
and (ii) of this section, a clearing member Board-regulated institution
may apply a risk weight of zero percent to the trade exposure amount
for a cleared transaction with a QCCP where the clearing member Board-regulated
institution is acting as a financial intermediary on behalf of a clearing
member client, the transaction offsets another transaction that satisfies
the requirements set forth in section 217.3(a), and the clearing member
Board-regulated institution is not obligated to reimburse the clearing
member client in the event of the QCCP default.
(4) Collateral.
(i) Notwithstanding any other requirement
of this section, collateral posted by a clearing member Board-regulated
institution that is held by a custodian (in its capacity
as a custodian) in a manner that is bankruptcy remote from the CCP,
clearing member, and other clearing member clients of the clearing
member, is not subject to a capital requirement under this section.
(ii) A clearing member
Board-regulated institution must calculate a risk-weighted asset amount
for any collateral provided to a CCP, clearing member or a custodian
in connection with a cleared transaction in accordance with requirements
under subparts E or F of this part, as applicable.
(1) General requirement. A clearing member Board-regulated institution must determine the
risk-weighted asset amount for a default fund contribution to a CCP
at least quarterly, or more frequently if, in the opinion of the Board-regulated
institution or the Board, there is a material change in the financial
condition of the CCP.
(2) Risk-weighted asset amount for default
fund contributions to nonqualifying CCPs. A clearing member Board-regulated
institution’s risk-weighted asset amount for default fund contributions
to CCPs that are not QCCPs equals the sum of such default fund contributions
multiplied by 1,250 percent, or an amount determined by the Board,
based on factors such as size, structure, and membership characteristics
of the CCP and riskiness of its transactions, in cases where such
default fund contributions may be unlimited.
(3) Risk-weighted
asset amount for default fund contributions to QCCPs. A clearing
member Board-regulated institution’s risk-weighted asset amount
for default fund contributions to QCCPs equals the sum of its capital
requirement, KCM for each QCCP, as calculated under the
methodology set forth in paragraph (d)(4) of this section, multiplied
by 12.5.
(4) Capital requirement for default fund contributions
to a QCCP. A clearing member Board-regulated institution’s
capital requirement for its default fund contribution to a QCCP (KCM) is equal to:
Figure 1. DISPLAY EQUATION
$$
K_{CM}=max \{ K_{CCP}\ast \Bigg( \frac{DF^{pref}}{DF_{CCP}+DF_{CCPCM}^{pref}} \Bigg) ;\text{0.16 }percent\ast DF^{pref} \}
$$
Where:
KCCP is the hypothetical capital requirement of the QCCP, as determined
under paragraph (d)(5) of this section;
DFpref is the
prefunded default fund contribution of the clearing member Board regulated
institution to the QCCP;
DFCCP is the QCCP’s own prefunded
amounts that are contributed to the default waterfall and are junior
or pari passu with prefunded default fund contributions of
clearing members of the QCCP; and
$$
+DF_{pref}^{CCPCM} \small{{\text{ is the total prefunded default fund contributions from clearing members of the QCCP to the QCCP.})
$$
(5) Hypothetical capital requirement of
a QCCP. Where a QCCP has provided its KCCP, a Board-regulated institution must rely on such disclosed
figure instead of calculating KCCP under
this paragraph (d)(5), unless the Board-regulated institution determines
that a more conservative figure is appropriate based on the nature,
structure, or characteristics of the QCCP. The hypothetical capital
requirement of a QCCP (KCCP), as determined
by the Board-regulated institution, is equal to:
Figure 2. DISPLAY EQUATION
$$
K_{CCP}= \sum\nolimits _{CM_{i}}^{}EAD_{i}\ast \text{1.6 }percent
$$
Where:
CMi is each clearing member of the QCCP; and
EADi is the exposure
amount of the QCCP to each clearing member of the QCCP, as determined
under paragraph (d)(6) of this section.
(6) EAD of a
QCCP to a clearing member.
(i) The EAD of a QCCP to
a clearing member is equal to the sum of the EAD for derivative contracts
determined under paragraph (d)(6)(ii) of this section and the EAD
for repo-style transactions determined under paragraph (d)(6)(iii)
of this section.
(ii) With respect to any derivative contracts between the QCCP and
the clearing member that are cleared transactions and any guarantees
that the clearing member has provided to the QCCP with respect to
performance of a clearing member client on a derivative contract, the
EAD is equal to the exposure amount of the QCCP to the clearing member
for all such derivative contracts and guarantees of derivative contracts
calculated under SA-CCR in section 217.132(c) (or, with respect to
a QCCP located outside the United States, under a substantially identical
methodology in effect in the jurisdiction) using a value of 10 business
days for purposes of section 217.132(c)(9)(iv); less the value of
all collateral held by the QCCP posted by the clearing member or a
client of the clearing member in connection with a derivative contract
for which the clearing member has provided a guarantee to the QCCP
and the amount of the prefunded default fund contribution of the clearing
member to the QCCP.
(iii) With respect to any repo-style transactions between the QCCP
and a clearing member that are cleared transactions, EAD is equal
to:
Figure 3. DISPLAY EQUATION
$$
EAD_i=max \{ EBRM_i-IM_i-DF_i;0 \}
$$
Where:
EBRMi is the exposure amount of the QCCP to each clearing member
for all repo-style transactions between the QCCP and the clearing
member, as determined under section 217.132(b)(2) and without recognition
of the initial margin collateral posted by the clearing member to
the QCCP with respect to the repo-style transactions or the prefunded
default fund contribution of the clearing member institution to the
QCCP;
IMi is the initial margin collateral posted by each clearing
member to the QCCP with respect to the repo-style transactions;
and
DFi is the prefunded default fund contribution of each
clearing member to the QCCP that is not already deducted in
paragraph (d)(6)(ii) of this section.
(iv) EAD must be calculated separately
for each clearing member’s sub-client accounts and sub-house
account (i.e., for the clearing member’s proprietary activities).
If the clearing member’s collateral and its client’s collateral
are held in the same default fund contribution account, then the EAD
of that account is the sum of the EAD for the client-related transactions
within the account and the EAD of the house-related transactions within
the account. For purposes of determining such EADs, the independent
collateral of the clearing member and its client must be allocated
in proportion to the respective total amount of independent collateral
posted by the clearing member to the QCCP.
(v) If any account or sub-account contains
both derivative contracts and repo-style transactions, the EAD of
that account is the sum of the EAD for the derivative contracts within
the account and the EAD of the repo-style transactions within the
account. If independent collateral is held for an account containing
both derivative contracts and repo-style transactions, then such collateral
must be allocated to the derivative contracts and repo-style transactions
in proportion to the respective product specific exposure amounts,
calculated, excluding the effects of collateral, according to section
217.132(b) for repo-style transactions and to section 217.132(c)(5)
for derivative contracts.
(vi) Notwithstanding any other provision
of paragraph (d) of this section, with the prior approval of the Board,
a Board-regulated institution may determine the risk-weighted asset
amount for a default fund contribution to a QCCP according to section
217.35(d)(3)(ii).
