SECTION
217.38—Unsettled Transactions
(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) 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 marked-to-market
daily and subject to daily receipt and payment of variation margin;
(2) Repo-style transactions,
including unsettled repo-style transactions;
(3) One-way cash payments on OTC derivative
contracts; or
(4) Transactions
with a contractual settlement period that is longer than the normal
settlement period (which are treated as OTC derivative contracts as
provided in section 217.34).
(c) System-wide failures. In the case of a
system-wide failure of a settlement, clearing system or 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 217.38.
Table 1 to
section 217.38—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 |
100.0 |
| From 16 to 30 |
625.0 |
| From 31 to 45 |
937.5 |
| 46 or more |
1,250.0 |
(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 the risk-weighted asset amount for the transaction by treating
the current fair value of the deliverables owed to the Board-regulated
institution as an exposure to the counterparty and using the applicable
counterparty risk weight under this subpart D.
(3) If the Board-regulated
institution has not received its deliverables by the fifth business
day after counterparty delivery was due, the Board-regulated institution
must assign 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.
