Counterparty credit risk add-on for repurchase transactions

Answer

The requirement under Article 429b 429e of Regulation (EU) No 575/2013 (CRR) (as inserted by Commission Delegated Regulation (EU) 2015/62) to include in the exposure measure an add-on for counterparty credit risk applies to all of the transactions listed in Article 429e(1) 429b(1) of Regulation (EU) 575/2013 (CRR). Thus, the add-on is to be included in particular for those repurchase transactions where an institution has received cash (which qualifies as 'fair value of cash received' for Ci in Article 429b(2) or (3) 429e(2) or (3) of the CRR) in exchange for transferring a security that the institution is obliged to repurchase at a later date (which qualifies as 'fair value of securities lent' for Ei in Article 429b(2) or (3) 429e(2) or (3) of the CRR). The add-on is also to be included for securities borrowing transactions for which the borrowed security qualifies as 'fair value of securities received' for Ci in Article 429b(2) or (3) 429e(2) or (3) of the CRR, independent of whether cash or another security has been posted in exchange (which qualifies as 'fair value of cash or securities lent' for Ei in Article 429b(2) or (3) 429e(2) or (3) of the CRR). Note, however, that the formula in Article 429b(2) 429e(2) of the CRR results in an add-on of Ei* = 0 where no cash or security has been posted in exchange for the borrowed security.