AI Summary of Article 299 Items in the trading book
This Article outlines the treatment of derivative instruments for credit risk transfer within regulatory frameworks, highlighting key calculations for risk-weighted exposure amounts. It delineates distinct percentages for counterparty risk based on whether the reference obligation qualifies under specific provisions of the capital requirements directive.
Institutions are advised against using the Financial Collateral Simple Method and are provided with guidance on eligible collateral within trading books. Notably, approaches to internal hedges involving credit derivatives are specified, necessitating due diligence in recognising counterparty risks and compliance with daily market valuation protocols.
Article 299 Items in the trading book
1. For the purposes of the application of this Article, Annex II shall include a reference to derivative instruments for the transfer of credit risk as mentioned in point (8) of Section C of Annex I to Directive 2004/39/EC.
2. When calculating risk-weighted exposure amounts for counterparty risk of items in the trading book, institutions shall comply with the following principles:
(a) [deleted]
(i) 5 %, where the reference obligation is one that, if it gave rise to a direct exposure of the institution, would be a qualifying item for the purposes of Part Three, Title IV, Chapter 2;
(ii) 10 %, where the reference obligation is one that, if it gave rise to a direct exposure of the institution, would not be a qualifying item for the purposes of Part Three, Title IV, Chapter 2.