For purposes of calculating risk-weighted
assets under subparts D and E of this part:
(a) Cleared transaction. In order to recognize
certain exposures as cleared transactions pursuant to paragraphs (1)(ii),
(iii), or (iv) of the definition of “cleared transaction” in section
217.2, the exposures must meet the applicable requirements set forth
in this paragraph (a).
(1) The offsetting transaction must be identified by the CCP as a
transaction for the clearing member client.
(2) The collateral supporting the transaction
must be held in a manner that prevents the Board-regulated institution
from facing any loss due to an event of default, including from a
liquidation, receivership, insolvency, or similar proceeding of either
the clearing member or the clearing member’s other clients. Omnibus
accounts established under 17 CFR parts 190 and 300 satisfy the requirements
of this paragraph (a).
(3) The Board-regulated
institution must conduct sufficient legal review to conclude with
a well-founded basis (and maintain sufficient written documentation
of that legal review) that in the event of a legal challenge (including
one resulting from a default or receivership, insolvency, liquidation,
or similar proceeding) the relevant court and administrative authorities
would find the arrangements of paragraph (a)(2) of this section to
be legal, valid, binding and enforceable under the law of the relevant
jurisdictions.
(4) The offsetting
transaction with a clearing member must be transferable under the
transaction documents and applicable laws in the relevant jurisdiction(s)
to another clearing member should the clearing member default, become
insolvent, or enter receivership, insolvency, liquidation, or similar
proceedings.
(b) Eligible
margin loan. In order to recognize an exposure as an eligible
margin loan as defined in section 217.2, a Board-regulated institution
must conduct sufficient legal review to conclude with a well-founded
basis (and maintain sufficient written documentation of that legal
review) that the agreement underlying the exposure:
(1) Meets the requirements of paragraph
(1)(iii) of the definition of eligible margin loan in section 217.2,
and
(2) Is legal, valid, binding,
and enforceable under applicable law in the relevant jurisdictions.
(c) Qualifying cross-product
master netting agreement. In order to recognize an agreement
as a qualifying cross-product master netting agreement as defined
in section 217.101, a Board-regulated institution must obtain a written
legal opinion verifying the validity and enforceability of the agreement
under applicable law of the relevant jurisdictions if the counterparty
fails to perform upon an event of default, including upon receivership,
insolvency, liquidation, or similar proceeding.
(d) Qualifying master netting agreement. In
order to recognize an agreement as a qualifying master netting agreement
as defined in section 217.2, a Board-regulated institution must:
(1) Conduct sufficient legal
review to conclude with a well-founded basis (and maintain sufficient
written documentation of that legal review) that:
(i) The agreement meets the requirements
of paragraph (2) of the definition of qualifying master netting agreement
in section 217.2; and
(ii) In
the event of a legal challenge (including one resulting from default
or from receivership, insolvency, liquidation, or similar proceeding)
the relevant court and administrative authorities would find the agreement
to be legal, valid, binding, and enforceable under the law of the
relevant jurisdictions; and
(2) Establish and maintain written procedures
to monitor possible changes in relevant law and to ensure that the
agreement continues to satisfy the requirements of the definition
of qualifying master netting agreement in section 217.2.
(e) Repo-style transaction. In
order to recognize an exposure as a repo-style transaction as defined
in section 217.2, a Board-regulated institution must conduct sufficient
legal review to conclude with a well-founded basis (and maintain sufficient
written documentation of that legal review) that the agreement underlying
the exposure:
(1) Meets
the requirements of paragraph (3) of the definition of repo-style
transaction in section 217.2, and
(2) Is legal, valid, binding, and enforceable under applicable law
in the relevant jurisdictions.
(f) Failure of a QCCP to satisfy the rule’s requirements. If a Board-regulated institution determines that a CCP ceases to
be a QCCP due to the failure of the CCP to satisfy one or more of
the requirements set forth in paragraphs (2)(i) through (2)(iii) of
the definition of a QCCP in section 217.2, the Board-regulated institution
may continue to treat the CCP as a QCCP for up to three months following
the determination. If the CCP fails to remedy the relevant deficiency
within three months after the initial determination, or the CCP fails
to satisfy the requirements set forth in paragraphs (2)(i) through
(2)(iii) of the definition of a QCCP continuously for a three- month
period after remedying the relevant deficiency, a Board-regulated
institution may not treat the CCP as a QCCP for the purposes of this
part until after the Board-regulated institution has determined that
the CCP has satisfied the requirements in paragraphs (2)(i) through
(2)(iii) of the definition of a QCCP for three continuous months.
