(a) Definitions. For purposes of this section:
(1) Delivery-versus-payment (DvP) transaction
means a securities or commodities transaction in which the buyer is
obligated to make payment only if the seller has made delivery of
the securities or commodities and the seller is obligated to deliver
the securities or commodities only if the buyer has made payment.
(2) Payment-versus-payment
(PvP) transaction means a foreign exchange transaction in which each
counterparty is obligated to make a final transfer of one or more
currencies only if the other counterparty has made a final transfer
of one or more currencies.
(3) A transaction has a normal settlement period if the contractual
settlement period for the transaction is equal to or less than the
market standard for the instrument underlying the transaction and
equal to or less than five business days.
(4) The positive current exposure of a
Board-regulated institution for a transaction is the difference between
the transaction value at the agreed settlement price and the current
market price of the transaction, if the difference results in a credit
exposure of the Board-regulated institution to the counterparty.
(b) Scope. This section applies to all transactions involving securities, foreign
exchange instruments, and commodities that have a risk of delayed
settlement or delivery. This section does not apply to:
(1) Cleared transactions that are subject
to daily marking-to-market and daily receipt and payment of variation
margin;
(2) Repo-style
transactions, including unsettled repo-style transactions (which are
addressed in sections 217.131 and 132);
(3) One-way cash payments on OTC derivative
contracts (which are addressed in sections 217.131 and 132); or
(4) Transactions with
a contractual settlement period that is longer than the normal settlement
period (which are treated as OTC derivative contracts and addressed
in sections 217.131 and 132).
(c) System-wide failures. In the case of a
system-wide failure of a settlement or clearing system, or a central
counterparty, the Board may waive risk-based capital requirements
for unsettled and failed transactions until the situation is rectified.
(d) Delivery-versus-payment
(DvP) and payment-versus-payment (PvP) transactions. A Board-regulated
institution must hold risk-based capital against any DvP or PvP transaction
with a normal settlement period if the Board-regulated institution’s
counterparty has not made delivery or payment within five business
days after the settlement date. The Board-regulated institution must
determine its risk-weighted asset amount for such a transaction by
multiplying the positive current exposure of the transaction for the
Board-regulated institution by the appropriate risk weight in Table
1 to section 217.136.
Table 1 to section
217.136—Risk weights for unsettled DvP and PvP transactions
| Number of business days after contractual
settlement date |
Risk weight to be applied to positive current exposure (in percent) |
| From 5 to 15 |
100 |
| From 16 to 30 |
625 |
| From 31 to 45 |
937.5 |
| 46
or more |
1,250 |
(e) Non-DvP/non-PvP
(non-delivery-versus-payment/non-payment-versus-payment) transactions.
(1) A Board-regulated institution
must hold risk-based capital against any non-DvP/non-PvP transaction
with a normal settlement period if the Board-regulated institution
has delivered cash, securities, commodities, or currencies to its
counterparty but has not received its corresponding deliverables by
the end of the same business day. The Board-regulated institution
must continue to hold risk-based capital against the transaction until
the Board-regulated institution has received its corresponding deliverables.
(2) From the business
day after the Board-regulated institution has made its delivery until
five business days after the counterparty delivery is due, the Board-regulated
institution must calculate its risk-based capital requirement for
the transaction by treating the current fair value of the deliverables
owed to the Board-regulated institution as a wholesale exposure.
(i) A Board-regulated institution may use a 45 percent LGD for the
transaction rather than estimating LGD for the transaction provided
the Board-regulated institution uses the 45 percent LGD for all transactions
described in paragraphs (e)(1) and (2) of this section.
(ii) A Board-regulated
institution may use a 100 percent risk weight for the transaction
provided the Board-regulated institution uses this risk weight for
all transactions described in paragraphs (e)(1) and (2) of this section.
(3) If the
Board-regulated institution has not received its deliverables by the
fifth business day after the counterparty delivery was due, the Board-regulated
institution must apply a 1,250 percent risk weight to the current
fair value of the deliverables owed to the Board-regulated institution.
(f) Total risk-weighted
assets for unsettled transactions. Total risk-weighted assets
for unsettled transactions is the sum of the risk-weighted asset amounts
of all DvP, PvP, and non-DvP/non-PvP transactions.
