AI Summary of Article 297 Obligations of institutions
Institutions must establish and uphold procedures to ensure the legal validity and enforceability of contractual netting agreements, consistently reviewing these against changes in relevant jurisdictions’ law as specified in Article 296(2)(b). Furthermore, comprehensive documentation pertaining to such netting agreements must be maintained.
In assessing credit risk exposure, institutions are required to factor in the effects of netting and manage counterparty credit risk (CCR) based on this measurement. For cross-product netting agreements under Article 295, it is crucial that each transaction included in a netting set is backed by a legal opinion, ensuring compliance with bilateral netting recognition requirements.
Article 297 Obligations of institutions
1. An institution shall establish and maintain procedures to ensure that the legal validity and enforceability of its contractual netting is reviewed in the light of changes in the law of relevant jurisdictions referred to in Article 296(2)(b).
2. The institution shall maintain all required documentation relating to its contractual netting in its files.
3. The institution shall factor the effects of netting into its measurement of each counterparty's aggregate credit risk exposure and the institution shall manage its CCR on the basis of those effects of that measurement.
4. In the case of contractual cross-product netting agreements referred to in Article 295, the institution shall maintain procedures under Article 296(2)(c) to verify that any transaction which is to be included in a netting set is covered by a legal opinion referred to in Article 296(2)(b).