Question
As per IFR article 36 paragraph 1 investment firm shall calculate exposure value with regard to a client or group of connected clients for the purposes of concentration risk as the exposure value of contracts and transactions referred to in Article 25(1) with the client in question, calculated in the manner laid down in Article 27. The question is whether the concentration risk should be also calculated for financial counterparties (e.g. members of QCCP) who investment firms hedge their own risk with (hedging of positions arising from derivatives with their clients).
Background on the question
It is clearly stated in IFR article 36 that concentration risk should be calculated for client or a group of connected client, but no mention about counterparties who the investment firms hedge their own risk with.
Answer
This question has been rejected because it is considered that EBA guidance or clarification is not needed with regard to the issue that it raises. It is considered that the existing regulatory framework is sufficiently clear and unambiguous.The Single Rule Book Q&A tool has been established to provide explanations and non-binding interpretations on questions relating to the practical application or implementation of the provisions of legislative acts referred to in Article 1(2) of the EBA’s founding Regulation, as well as associated delegated and implementing acts, and guidelines and recommendations, adopted under these legislative acts.For further information on the purpose of this tool and on how to submit questions, please see “Additional background and guidance for asking questions”.