(a) Calculation
of gross credit exposure. The amount of gross credit exposure
of a covered foreign entity to a counterparty with respect to a credit
transaction is, in the case of:
(1) A deposit of the covered foreign entity
held by the counterparty, loan by a covered foreign entity to the
counterparty, and lease in which the covered foreign entity is the
lessor and the counterparty is the lessee, equal to the amount owed
by the counterparty to the covered foreign entity under the transaction.
(2) A debt security or debt investment
held by the covered foreign entity 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 foreign entity 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 foreign entity
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
foreign entity 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
foreign entity 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
foreign entity 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
252.171(l); and
(B) Include
the value of securities that are eligible collateral received by the
covered foreign entity 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 paragraph (a)(4)(i)
and (ii) of this section and with respect to each credit transaction,
a covered foreign entity’s gross credit exposure to a collateral issuer
under this paragraph (a)(4) is limited to the covered foreign entity’s
gross credit exposure to the counterparty on the credit transaction;
(iv) In cases where the covered
foreign entity 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 252.174(b).
(5) A committed credit line extended by
a covered foreign entity to a counterparty, equal to the face amount
of the committed credit line.
(6)
A guarantee or letter of credit issued by a covered foreign entity
on behalf of a counterparty, equal to the maximum potential loss to
the covered foreign entity on the transaction.
(7) A derivative transaction must be valued
using any of the methods that the covered foreign entity 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 foreign
entity 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 foreign
entity 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 foreign
entity is required to recognize an exposure to an eligible guarantor
pursuant to section 252.174(d), the covered foreign entity 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 foreign entity and a third party where the covered foreign
entity 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 foreign entity on the transaction.
(b) Investments in and exposures to
securitization vehicles, investment funds, and other special purpose
vehicles that are not affiliates. Notwithstanding paragraph (a)
of this section.
(1) A
U.S. intermediate holding company that is a covered foreign entity
and that has less than $250 billion in total consolidated assets as
of December 31, 2019 is not required to comply with paragraph (b)(3)
of this section until January 1, 2021.
(2) Until January 1, 2021, unless the Board applies the requirements
of section 252.175 to the transaction pursuant to section 252.175(d),
a U.S. intermediate holding company that is a covered foreign entity
and that has less than $250 billion in total consolidated assets as
of December 31, 2019 must:
(i) Calculate pursuant to paragraph
(a) of this section its gross credit exposure due to any investment
in the debt or equity of, and any credit derivative or equity derivative
between the covered foreign entity and a third party where the covered
foreign entity is in 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 an affiliate of the covered foreign entity; and
(ii) Attribute that gross credit
exposure to the securitization vehicle, investment fund, or other
special purpose vehicle for purposes of this subpart.
(3) Except as provided in paragraph
(b)(1) of this section, a covered foreign entity must calculate pursuant
to section 252.175 its gross credit exposure due to any investment
in the debt or equity of, and any credit derivative or equity derivative
between the covered foreign entity and a third party where the covered
foreign entity 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 an affiliate of the covered foreign entity.
(c) Attribution rule. Notwithstanding paragraph (a) of this section, a covered foreign
entity 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.
