(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 the Board’s Regulation Q (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 the Board’s Regulation Q (12 CFR 217.2); 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 the Board’s Regulation
Q (12 CFR 217.2);
(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 252.71(k);
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 252.74(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 the Board’s Regulation Q (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 252.74(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 252.75 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.
