European Banking Authority: methodologies for calculation of large exposures – indirect exposures arising from certain derivatives
Last week on 19 February, the European Banking Authority (EBA) published final draft regulatory technical standards (RTS) specifying how institutions should determine exposures arising from derivative and credit derivative contracts not entered directly into with a client but whose underlying debt or equity instrument was issued by a client.
This is in order to make calculation of large exposures consistent under the relevant regulatory framework (Capital Requirements Regulation, Basel standard (LEX), Risk Reduction Measures (RRM) package).
The draft RTS propose distinct methodologies for calculation of indirect exposures and exposures stemming from contracts with multiple underlying reference names.
The European Ban