AI Summary of Article 378 Settlement/delivery risk
In instances where transactions involving debt instruments, equities, foreign currencies, and commodities remain unsettled past their due delivery dates, institutions must assess their exposure to price differences. This exposure is determined by calculating the variance between the agreed settlement price and the current market value, which may result in a potential loss for the institution.
To ascertain the requisite own funds for addressing settlement risk, the institution shall apply the appropriate multiplication factor as outlined in Table 1, based on the number of working days that have elapsed since the settlement due date.
Article 378 Settlement/delivery risk
In the case of transactions in which debt instruments, equities, foreign currencies and commodities excluding repurchase transactions and securities or commodities lending and securities or commodities borrowing are unsettled after their due delivery dates, an institution shall calculate the price difference to which it is exposed.
The price difference is calculated as the difference between the agreed settlement price for the debt instrument, equity, foreign currency or commodity in question and its current market value, where the difference could involve a loss for the credit institution.
The institution shall multiply that price difference by the appropriate factor in the right column of the following Table 1 in order to calculate the institution's own funds requirement for settlement risk.
Table 1
| Number of working days after due settlement date | (%) |
|---|---|
| 5 - 15 | 8 |
| 16 - 30 | 50 |
| 31 - 45 | 75 |
| 46 or more | 100 |