AI Summary of Article 280c Credit risk category add-on
Institutions are required to establish credit reference entities for netting sets concerning single-name and multi-name transactions in accordance with specified criteria. A distinct credit reference entity must be assigned to each issuer of individual debt instruments for single-name transactions, while multi-name transactions require a unified credit reference entity for groups of instruments with shared constituents.
The calculation of credit risk category add-ons involves supervisory factors that depend on external credit assessments or internal mappings. Specific supervisory factors are outlined for both single-name and index-based credit transactions, ensuring robust risk management practices in compliance with regulatory expectations.
Article 280c Credit risk category add-on
1. For the purposes of paragraph 2, institutions shall establish the relevant credit reference entities of the netting set in accordance with the following:
(a) there shall be one credit reference entity for each issuer of a reference debt instrument that underlies a single-name transaction allocated to the credit risk category; single-name transactions shall be assigned to the same credit reference entity only where the underlying reference debt instrument of those transactions is issued by the same issuer;
(b) there shall be one credit reference entity for each group of reference debt instruments or single-name credit derivatives that underlie a multi-name transaction allocated to the credit risk category; multi-names transactions shall be assigned to the same credit reference entity only where the group of underlying reference debt instruments or single-name credit derivatives of those transactions have the same constituents.
2. For the purposes of Article 278, institution shall calculate the credit risk category add-on for a given netting set as follows:
where: