AI Summary of Article 166 Exposures to corporates, institutions, central governments and central banks, regional governments, local authorities and public sector entities and retail exposures
This document outlines the criteria for determining exposure values of on-balance sheet and off-balance sheet items, emphasising the importance of not considering credit risk adjustments. Exposure values for various financial instruments, including repurchase transactions and leases, are defined, along with specific methodologies to calculate them. For off-balance-sheet items, institutions must apply either IRB-CCF or SA-CCF methodologies, depending on regulatory permissions and the nature of the commitments.
Moreover, guidelines are provided for how institutions should handle undrawn amounts and the treatment of revolving commitments, ensuring adequate monitoring and compliance are in place for effective risk management.
Article 166 Exposures to corporates, institutions, central governments and central banks, regional governments, local authorities and public sector entities and retail exposures
1. Unless noted otherwise, the exposure value of on-balance sheet exposures shall be the accounting value measured without taking into account any credit risk adjustments made.
This rule also applies to assets purchased at a price different than the amount owed.
For purchased assets, the difference between the amount owed and the accounting value remaining after specific credit risk adjustments have been applied that has been recorded on the balance-sheet of the institutions when purchasing the asset is denoted discount if the amount owed is larger, and premium if it is smaller.
2. Where institutions use master netting agreements in relation to repurchase transactions or securities or commodities lending or borrowing transactions, the exposure value shall be calculated in accordance with Chapter 4 or 6.
3. In order to calculate the exposure value for on-balance sheet netting of loans and deposits, institutions shall apply the methods set out in Chapter 4.