(a)treat the exposure as having been incurred to the guarantor rather than to the client; or
2.Where Member States apply the treatment provided for in point (a) of paragraph 1:
1.Where an exposure to a client is guaranteed by a third party, or secured by collateral in the form of securities issued by a third partyparty, undera thecredit conditions laid down in Article 113(3)(o), Member Statesinstitution may:
(a)treat the portion of the exposure which is guaranteed as having been incurred to the guarantor rather than to the client provided that the unsecured exposure to the guarantor would be assigned an equal or lower risk weight than a risk weight of the unsecured exposure to the client under Articles 78 to 83;
(b)treat the portion of the exposure collateralised by the market value of recognised collateral as having been incurred to the third party rather than to the client, if the exposure defined in Article 113(3)(o) is guaranteedsecured by collateral underand provided that the conditionscollateralised thereportion laidof down.the exposure would be assigned an equal or lower risk weight than a risk weight of the unsecured exposure to the client under Articles 78 to 83.
The approach referred to in point (b) of the first subparagraph shall not be used by a credit institution where there is a mismatch between the maturity of the exposure and the maturity of the protection.
For the purpose of this Section, a credit institution may use both the Financial Collateral Comprehensive Method and the treatment provided for in point (b) of the first subparagraph only where it is permitted to use both the Financial Collateral Comprehensive Method and the Financial Collateral Simple Method for the purposes of Article 75(a).
2.Where a credit institution applies paragraph 1(a):
(a)where the guarantee is denominated in a currency different from that in which the exposure is denominated the amount of the exposure deemed to be covered will be calculated in accordance with the provisions on the treatment of currency mismatch for unfunded credit protection in Annex VIII;
(b)a mismatch between the maturity of the exposure and the maturity of the protection will be treated in accordance with the provisions on the treatment of maturity mismatch in Annex VIII; and
(c)partial coverage may be recognised in accordance with the treatment set out in Annex VIII.