AI Summary of Article 67 Deductions of holdings of own Tier 2 instruments
This document outlines specific conditions under which institutions can calculate holdings based on net long positions for the purpose of Article 66. Notably, this is permissible when both long and short positions relate to the same underlying exposure, with short positions carrying no counterparty risk.
Additionally, institutions must consider the classification of their positions—either in the trading or non-trading book. Further provisions address the treatment of Tier 2 instruments, allowing for the netting of gross long positions against short positions, contingent upon compliance with set conditions. This regulatory framework aims to enhance capital adequacy and risk management practices within financial entities.
Article 67 Deductions of holdings of own Tier 2 instruments
For the purposes of point (a) of Article 66, institutions shall calculate holdings on the basis of the gross long positions subject to the following exceptions:
(a) institutions may calculate the amount of holdings on the basis of the net long position provided that both the following conditions are met:
(i) the long and short positions are in the same underlying exposure and the short positions involve no counterparty risk;
(ii) either both the long and the short positions are held in the trading book or both are held in the non-trading book;
(b) institutions shall determine the amount to be deducted for direct, indirect and synthetic holdings of index securities by calculating the underlying exposure to own Tier 2 instruments in those indices;
(c) institutions may net gross long positions in own Tier 2 instruments resulting from holdings of index securities against short positions in own Tier 2 instruments resulting from short positions in the underlying indices, including where those short positions involve counterparty risk, provided that both the following conditions are met:
(i) the long and short positions are in the same underlying indices;