AI Summary of Article 70 Deduction of Tier 2 instruments where an institution does not have a significant investment in a relevant entity
This document outlines the calculation method for deductions regarding holdings of financial sector instruments as per Article 66. Institutions must determine the applicable deduction amount by evaluating their aggregate holdings of Common Equity Tier 1, Additional Tier 1, and Tier 2 instruments, particularly where these exceed established thresholds. Key provisions necessitate the exclusion of certain short-term underwriting positions from these calculations.
Furthermore, the deductions are apportioned across Tier 2 instruments based on their relative holdings, with specific thresholds dictating applicable risk weights for those holdings that fall within certain limits. Compliance with these requirements is vital for regulatory adherence and sound risk management.
Article 70 Deduction of Tier 2 instruments where an institution does not have a significant investment in a relevant entity
1. For the purposes of point (c) of Article 66, institutions shall calculate the applicable amount to be deducted by multiplying the amount referred to in point (a) of this paragraph by the factor derived from the calculation referred to in point (b) of this paragraph:
(a) the aggregate amount by which the direct, indirect and synthetic holdings by the institution of the Common Equity Tier 1, Additional Tier 1 and Tier 2 instruments of financial sector entities in which the institution does not have a significant investment exceeds 10 % of the Common Equity Tier 1 items of the institution calculated after applying the following:
(ii) Article 36(1), points (a) to (g), points (k)(ii) to (vi) and points (l), (m) and (n), excluding the amount to be deducted for deferred tax assets that rely on future profitability and arise from temporary differences;
(iii) Articles 44 and 45;