AI Summary of Article 429e Counterparty credit risk add-on for securities financing transactions
The assessment of total exposure for institutions must incorporate an add-on for counterparty credit risk, addressing both on-balance-sheet and off-balance-sheet securities financing transactions. Institutions are mandated to calculate this add-on based on the presence of master netting agreements and to apply the appropriate formulas as stipulated.
Furthermore, specific provisions apply when institutions act as agents in these transactions, particularly regarding indemnities and guarantees provided to parties involved. It is crucial to determine the institution's exposure, ensuring compliance with regulatory frameworks whilst accurately reflecting risk in the total exposure measure.
Article 429e Counterparty credit risk add-on for securities financing transactions
1. In addition to the calculation of the exposure value of securities financing transactions, including those that are off-balance-sheet in accordance with Article 429b(1), institutions shall include in the total exposure measure an add-on for counterparty credit risk calculated in accordance with paragraph 2 or 3 of this Article, as applicable.
2. Institutions shall calculate the add-on for transactions with a counterparty that are not subject to a master netting agreement that meets the conditions set out in Article 206 on a transaction-by-transaction basis in accordance with the following formula:
Institutions may set 
equal to zero where 
is the cash lent to a counterparty and the associated cash receivable is not eligible for the netting treatment set out in Article 429b(4).