AI Summary of Article 45 Deduction of holdings of Common Equity Tier 1 instruments of financial sector entities
This summary outlines provisions regarding the deduction calculations for Common Equity Tier 1 instruments as stipulated in Article 36(1). Financial institutions are permitted to assess both direct, indirect, and synthetic holdings based on net long positions in underlying exposures, under specific conditions regarding maturity dates and the categorisation of positions within either the trading or non-trading book.
Furthermore, institutions are required to calculate deductions related to holdings of index securities by determining the underlying capital exposures of the financial sector entities included in these indices. Compliance with these standards is essential in ensuring regulatory alignment.
Article 45 Deduction of holdings of Common Equity Tier 1 instruments of financial sector entities
Institutions shall make the deductions required by points (h) and (i) of Article 36(1) in accordance with the following provisions:
(a) they may calculate direct, indirect and synthetic holdings of Common Equity Tier 1 instruments of the financial sector entities on the basis of the net long position in the same underlying exposure provided that both the following conditions are met:
(i)the maturity date of the short position is either the same as, or later than the maturity date of the long position or the residual maturity of the short position is at least one year;
(ii) either both the long position and the short position are held in the trading book or both are held in the non-trading book;
(b) they shall determine the amount to be deducted for direct, indirect and synthetic holdings of index securities by calculating the underlying exposure to the capital instruments of the financial sector entities in those indices.