(a) Calculation of gross credit
exposure. The amount of gross credit exposure of a covered company
to a counterparty with respect to a credit transaction is, in the
case of:
(1) A deposit
of the covered company held by the counterparty, loan by a covered
company to the counterparty, and lease in which the covered company
is the lessor and the counterparty is the lessee, equal to the amount
owed by the counterparty to the covered company under the transaction.
(2) A debt security or debt investment
held by the covered company that is issued by the counterparty, equal
to:
(i) The market
value of the securities, for trading and available-for-sale securities;
and
(ii) The amortized purchase
price of the securities or investments, for securities or investments
held to maturity.
(3)
An equity security held by the covered company that is issued by the
counterparty, equity investment in a counterparty, and other direct
investments in a counterparty, equal to the market value.
(4) A securities financing transaction
must be valued using any of the methods that the covered company is
authorized to use under 12 CFR part 217, subparts D and E to value
such transactions:
(i) (A) As calculated for each transaction,
in the case of a securities financing transaction between the covered
company and the counterparty that is not subject to a bilateral netting
agreement or does not meet the definition of “repo-style transaction”
in section 217.2 of this chapter; or
(B) As calculated for a netting set, in the case of a securities
financing transaction between the covered company and the counterparty
that is subject to a bilateral netting agreement with that counterparty
and meets the definition of “repo-style transaction” in section 217.2
of this chapter;
(ii) For purposes of paragraph (a)(4)(i) of this section, the covered
company must:
(A) Assign
a value of zero to any security received from the counterparty that
does not meet the definition of “eligible collateral” in section 238.151;
and
(B) Include the value of securities
that are eligible collateral received by the covered company from
the counterparty (including any exempt counterparty), calculated in
accordance with paragraphs (a)(4)(i) through (iv) of this section,
when calculating its gross credit exposure to the issuer of those
securities;
(iii)
Notwithstanding paragraphs (a)(4)(i) and (ii) of this section and
with respect to each credit transaction, a covered company’s gross
credit exposure to a collateral issuer under this paragraph (a)(4)
is limited to the covered company’s gross credit exposure to the counterparty
on the credit transaction; and
(iv) In cases where the covered company receives eligible collateral
from a counterparty in addition to the cash or securities received
from that counterparty, the counterparty may reduce its gross credit
exposure to that counterparty in accordance with section 238.154(b).
(5) A committed credit
line extended by a covered company to a counterparty, equal to the
face amount of the committed credit line.
(6) A guarantee or letter of credit issued
by a covered company on behalf of a counterparty, equal to the maximum
potential loss to the covered company on the transaction.
(7) A derivative transaction must be valued
using any of the methods that the covered company is authorized to
use under 12 CFR part 217, subparts D and E to value such transactions:
(i) (A)
As calculated for each transaction, in the case of a derivative transaction
between the covered company and the counterparty, including an equity
derivative but excluding a credit derivative described in paragraph
(a)(8) of this section, that is not subject to a qualifying master
netting agreement; or
(B) As calculated
for a netting set, in the case of a derivative transaction between
the covered company and the counterparty, including an equity derivative
but excluding a credit derivative described in paragraph (a)(8) of
this section, that is subject to a qualifying master netting agreement.
(ii) In cases where
a covered company is required to recognize an exposure to an eligible
guarantor pursuant to section 238.154(d), the covered company must
exclude the relevant derivative transaction when calculating its gross
exposure to the original counterparty under this section.
(8) A credit derivative between the
covered company and a third party where the covered company is the protection
provider and the reference asset is an obligation or debt security
of the counterparty, equal to the maximum potential loss to the covered
company on the transaction.
(b) Investments in and exposures to securitization
vehicles, investment funds, and other special purpose vehicles that
are not subsidiaries. Notwithstanding paragraph (a) of this section,
a covered company must calculate pursuant to section 238.155 its gross
credit exposure due to any investment in the debt or equity of, and
any credit derivative or equity derivative between the covered company
and a third party where the covered company is the protection provider
and the reference asset is an obligation or equity security of, or
equity investment in, a securitization vehicle, investment fund, and
other special purpose vehicle that is not a subsidiary of the covered
company.
(c) Attribution rule. Notwithstanding any other requirement in this subpart, a covered
company must treat any transaction with any natural person or entity
as a credit transaction with another party, to the extent that the
proceeds of the transaction are used for the benefit of, or transferred
to, the other party.
