Question
The potential future exposure of a netting set with clients for which collateral is exchanged bilaterally may be decreased to 42%. Is it applicable only if the investment firm is the recepient of the collateral (initial and variation margin) or it can be also applied if the investment firm is the collateral provider.
Background on the question
In IFR article 29 paragraph 8 is stated that the potential future exposure of a netting set is the sum of the potential future exposure of all transactions included in the netting set, multiplied by 0,42, for netting sets of transactions with financial and non‐financial counterparties for which collateral is exchanged bilaterally with the counterparty, if required, in accordance with the conditions laid down in Article 11 of Regulation (EU) No 648/2012;
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”.