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20 / 23

L 302/116


Official Journal of the European Union


the minimum retention requirement under Article 122a(1) delivers the objective of better alignment between the inter­ ests of originators or sponsors and investors and strengthens financial stability, and whether an increase of the minimum level of retention would be appropriate taking into account international developments.

By 1 January 2012, the Commission shall report to the Euro­ pean Parliament and the Council on the application and effectiveness of Article 122a in the light of international mar­ ket developments.’;

  • 39.

    Annex III is amended as follows:

    • (a)

      in Part 1, point 5, the following sentence is added: ‘Under the method set out in Part 6 of this Annex (IMM),

all netting sets with a single counterparty may be treated as single netting set if negative simulated market values of the individual netting sets are set to 0 in the estima­ tion of expected exposure (EE).’;

(b) in Part 2, point 3 is replaced by the following:

the “nth to default” derivative with respect to a change in the credit spread of the reference debt instrument;

  • (b)

    there is one hedging set for each reference debt instrument in a basket underlying a given “nth to default” credit default swap; risk positions from different “nth to default” credit default swaps shall not be included in the same hedg­ ing set;

  • (c)

    the CCR multiplier applicable to each hedging set created for one of the reference debt instru­ ments of an “nth to default” derivative is 0,3 % for reference debt instruments that have a credit assessment from a recognised ECAI equivalent to credit quality step 1 to 3 and 0,6 % for other debt instruments.’;

  • 40.

    Annex V is amended as follows:

    • (a)

      point 8 is replaced by the following:

‘3. When a credit institution purchases credit derivative protection against a non-trading book exposure, or against a CCR exposure, it may compute its capital requirement for the hedged asset in accordance with Annex VIII, Part 3, points 83 to 92, or subject to the approval of the competent authorities, in accor­ dance with Annex VII, Part 1, point 4 or Annex VII, Part 4, points 96 to 104.

‘8. The risks arising from securitisation transactions in relation to which the credit institutions are investor, originator or sponsor, including reputational risks (such as arise in relation to complex structures or products) shall be evaluated and addressed through appropriate policies and procedures, to ensure in particular that the economic substance of the transaction is fully reflected in the risk assess­ ment and management decisions.’;

In those cases, and where the option in the second sentence of point 11 in Annex II of Directive 2006/49/EC is not applied, the exposure value for CCR for those credit derivatives is set to zero.

(b) point 14 is replaced by the following:

However, an institution may choose consistently to include for the purposes of calculating capital requirements for counterparty credit risk all credit derivatives not included in the trading book and purchased as protection against a non-trading book exposure or against a CCR exposure where the credit protection is recognised under this Directive.’;

‘14. Robust strategies, policies, processes and systems shall exist for the identification, measurement, man­ agement and monitoring of liquidity risk over an appropriate set of time horizons, including intra- day, so as to ensure that credit institutions maintain adequate levels of liquidity buffers. Those strategies, policies, processes and systems shall be tailored to business lines, currencies and entities and shall include adequate allocation mechanisms of liquid­ ity costs, benefits and risks.’;

(c) in Part 5, point 15 is replaced by the following:

(c) the following point is inserted:

‘15. There is one hedging set for each issuer of a refer­ ence debt instrument that underlies a credit default swap. “Nth to default” basket credit default swaps shall be treated as follows:

(a) the size of a risk position in a reference debt instrument in a basket underlying an “nth to default” credit default swap is the effective notional value of the reference debt instru­ ment, multiplied by the modified duration of

‘14a. The strategies, policies, processes and systems referred to in point 14 shall be proportionate to the complexity, risk profile, scope of operation of the credit institution and risk tolerance set by the management body and reflect the credit institu­ tion’s importance in each Member State, in which it carries on business. Credit institutions shall com­ municate risk tolerance to all relevant business lines.’;

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