AI Summary of Article 379 Free deliveries
This document outlines the capital requirements for institutions engaging in free delivery transactions, where payments or deliveries are not synchronous. Institutions must maintain own funds if they have made payments or deliveries and over a day has elapsed in cross-border transactions.
Table 2 indicates the capital treatment for these free deliveries, with varying risk weights applied based on the timing of the transactions. Institutions can opt for different approaches to assess risk, including utilisation of external ratings or applying a standardised risk weight, ensuring compliance with regulation without diluting capital adequacy.
Article 379 Free deliveries
1. An institution shall be required to hold own funds, as set out in Table 2, where the following occurs:
(a) it has paid for securities, foreign currencies or commodities before receiving them or it has delivered securities, foreign currencies or commodities before receiving payment for them;
(b) in the case of cross-border transactions, one day or more has elapsed since it made that payment or delivery.
Table 2
Capital treatment for free deliveries
|
Column 1 |
Column 2 |
Column 3 |
Column 4 |
|---|---|---|---|
|
Transaction Type |
Up to first contractual payment or delivery leg |
From first contractual payment or delivery leg up to four days after second contractual payment or delivery leg |
From 5 business days post second contractual payment or delivery leg until extinction of the transaction |
|
Free delivery |
No capital charge |
Treat as an exposure |
Treat as an exposure risk-weighted at 1 250 % |