AI Summary of Article 72h Deduction of holdings of eligible liabilities of other G-SII entities
This guidance addresses the calculation of deductions for institutions that do not employ the exception outlined in Article 72j. Institutions are permitted to determine their direct, indirect, and synthetic holdings of eligible liabilities instruments by assessing the net long position in the associated underlying exposure, contingent upon specific conditions regarding the maturity dates and the nature of the positions.
Moreover, when evaluating holdings of index securities, institutions are required to 'look through' to the underlying eligible liabilities instruments. Compliance with these provisions ensures precise alignment with regulatory expectations whilst enhancing risk management frameworks.
Article 72h Deduction of holdings of eligible liabilities of other G-SII entities
Institutions not making use of the exception set out in Article 72j shall make the deductions referred to in points (c) and (d) of Article 72e(1) in accordance with the following:
(a) they may calculate direct, indirect and synthetic holdings of eligible liabilities instruments on the basis of the net long position in the same underlying exposure, provided that both the following conditions are met:
(i) the maturity date of the short position is either the same as, or later than the maturity date of the long position or the residual maturity of the short position is at least one year;
(ii) either both the long position and the short position are held in the trading book or both are held in the non-trading book;
(b) they shall determine the amount to be deducted for direct, indirect and synthetic holdings of index securities by looking through to the underlying exposure to the eligible liabilities instruments in those indices.