(a) General requirements--(1) Clearing member clients. An FDIC-supervised institution that is a clearing member client must use the methodologies described in paragraph (b) of this section to calculate risk-weighted assets for a cleared transaction.
(1) Clearing member clients. An FDIC-supervised institution that is a clearing member client must use the methodologies described in paragraph (b) of this section to calculate risk-weighted assets for a cleared transaction.
(2) Clearing members. An FDIC-supervised institution that is a clearing member must use the methodologies described in paragraph (c) of this section to calculate its risk-weighted assets for a cleared transaction and paragraph (d) of this section to calculate its risk-weighted assets for its default fund contribution to a CCP.
(b) Clearing member client FDIC-supervised institutions--(1) Risk-weighted assets for cleared transactions. (i) To determine the risk-weighted asset amount for a cleared transaction, an FDIC-supervised institution that is a clearing member client must multiply the trade exposure amount for the cleared transaction, calculated in accordance with paragraph (b)(2) of this section, by the risk weight appropriate for the cleared transaction, determined in accordance with paragraph (b)(3) of this section.
(1) Risk-weighted assets for cleared transactions. (i) To determine the risk-weighted asset amount for a cleared transaction, an FDIC-supervised institution that is a clearing member client must multiply the trade exposure amount for the cleared transaction, calculated in accordance with paragraph (b)(2) of this section, by the risk weight appropriate for the cleared transaction, determined in accordance with paragraph (b)(3) of this section.
(i) To determine the risk-weighted asset amount for a cleared transaction, an FDIC-supervised institution that is a clearing member client must multiply the trade exposure amount for the cleared transaction, calculated in accordance with paragraph (b)(2) of this section, by the risk weight appropriate for the cleared transaction, determined in accordance with paragraph (b)(3) of this section.
(ii) A clearing member client FDIC-supervised institution's total risk-weighted assets for cleared transactions is the sum of the risk-weighted asset amounts for all its cleared transactions.
(2) Trade exposure amount. (i) For a cleared transaction that is either a derivative contract or a netting set of derivative contracts, the trade exposure amount equals:
(i) For a cleared transaction that is either a derivative contract or a netting set of derivative contracts, the trade exposure amount equals:
(A) The exposure amount for the derivative contract or netting set of derivative contracts, calculated using the methodology used to calculate exposure amount for OTC derivative contracts under Sec. 324.34; plus
(B) The fair value of the collateral posted by the clearing member client FDIC-supervised institution and held by the CCP, clearing member, or custodian in a manner that is not bankruptcy remote.
(ii) For a cleared transaction that is a repo-style transaction or netting set of repo-style transactions, the trade exposure amount equals:
(A) The exposure amount for the repo-style transaction calculated using the methodologies under Sec. 324.37(c); plus
(B) The fair value of the collateral posted by the clearing member client FDIC-supervised institution and held by the CCP, clearing member, or custodian in a manner that is not bankruptcy remote.
(3) Cleared transaction risk weights. (i) For a cleared transaction with a QCCP, a clearing member client FDIC-supervised institution must apply a risk weight of:
(i) For a cleared transaction with a QCCP, a clearing member client FDIC-supervised institution must apply a risk weight of:
(A) 2 percent if the collateral posted by the FDIC-supervised institution to the QCCP or clearing member is subject to an arrangement that prevents any losses to the clearing member client FDIC-supervised institution due to the joint default or a concurrent insolvency, liquidation, or receivership proceeding of the clearing member and any other clearing member clients of the clearing member; and the clearing member client FDIC-supervised institution has conducted sufficient legal review to conclude with a well-founded basis (and maintains sufficient written documentation of that legal review) that in the event of a legal challenge (including one resulting from an event of default or from liquidation, insolvency, or receivership proceedings) the relevant court and administrative authorities would find the arrangements to be legal, valid, binding and enforceable under the law of the relevant jurisdictions; or
(B) 4 percent if the requirements of Sec. 324.35(b)(3)(A) are not met.
(ii) For a cleared transaction with a CCP that is not a QCCP, a clearing member client FDIC-supervised institution must apply the risk weight appropriate for the CCP according to Sec. 324.32.
(4) Collateral. (i) Notwithstanding any other requirements in this section, collateral posted by a clearing member client FDIC-supervised institution that is held by a custodian (in its capacity as custodian) in a manner that is bankruptcy remote from the CCP, the custodian, clearing member and other clearing member clients of the clearing member, is not subject to a capital requirement under this section.
(i) Notwithstanding any other requirements in this section, collateral posted by a clearing member client FDIC-supervised institution that is held by a custodian (in its capacity as custodian) in a manner that is bankruptcy remote from the CCP, the custodian, clearing member and other clearing member clients of the clearing member, is not subject to a capital requirement under this section.
(ii) A clearing member client FDIC-supervised institution must calculate a risk-weighted asset amount for any collateral provided to a CCP, clearing member, or custodian in connection with a cleared transaction in accordance with the requirements under Sec. 324.32.
(c) Clearing member FDIC-supervised institutions--(1) Risk-weighted assets for cleared transactions. (i) To determine the risk-weighted asset amount for a cleared transaction, a clearing member FDIC-supervised institution must multiply the trade exposure amount for the cleared transaction, calculated in accordance with paragraph (c)(2) of this section, by the risk weight appropriate for the cleared transaction, determined in accordance with paragraph (c)(3) of this section.
(1) Risk-weighted assets for cleared transactions. (i) To determine the risk-weighted asset amount for a cleared transaction, a clearing member FDIC-supervised institution must multiply the trade exposure amount for the cleared transaction, calculated in accordance with paragraph (c)(2) of this section, by the risk weight appropriate for the cleared transaction, determined in accordance with paragraph (c)(3) of this section.
(i) To determine the risk-weighted asset amount for a cleared transaction, a clearing member FDIC-supervised institution must multiply the trade exposure amount for the cleared transaction, calculated in accordance with paragraph (c)(2) of this section, by the risk weight appropriate for the cleared transaction, determined in accordance with paragraph (c)(3) of this section.
(ii) A clearing member FDIC-supervised institution's total risk-weighted assets for cleared transactions is the sum of the risk-weighted asset amounts for all of its cleared transactions.
(2) Trade exposure amount. A clearing member FDIC-supervised institution must calculate its trade exposure amount for a cleared transaction as follows:
(i) For a cleared transaction that is either a derivative contract or a netting set of derivative contracts, the trade exposure amount equals:
(A) The exposure amount for the derivative contract, calculated using the methodology to calculate exposure amount for OTC derivative contracts under Sec. 324.34; plus
(B) The fair value of the collateral posted by the clearing member FDIC-supervised institution and held by the CCP in a manner that is not bankruptcy remote.
(ii) For a cleared transaction that is a repo-style transaction or netting set of repo-style transactions, trade exposure amount equals:
(A) The exposure amount for repo-style transactions calculated using methodologies under Sec. 324.37(c); plus
(B) The fair value of the collateral posted by the clearing member FDIC-supervised institution and held by the CCP in a manner that is not bankruptcy remote.
(3) Cleared transaction risk weight. (i) A clearing member FDIC-supervised institution must apply a risk weight of 2 percent to the trade exposure amount for a cleared transaction with a QCCP.
(i) A clearing member FDIC-supervised institution must apply a risk weight of 2 percent to the trade exposure amount for a cleared transaction with a QCCP.
(ii) For a cleared transaction with a CCP that is not a QCCP, a clearing member FDIC-supervised institution must apply the risk weight appropriate for the CCP according to Sec. 324.32.
(4) Collateral. (i) Notwithstanding any other requirement in this section, collateral posted by a clearing member FDIC-supervised institution that is held by a custodian in a manner that is bankruptcy remote from the CCP is not subject to a capital requirement under this section.
(i) Notwithstanding any other requirement in this section, collateral posted by a clearing member FDIC-supervised institution that is held by a custodian in a manner that is bankruptcy remote from the CCP is not subject to a capital requirement under this section.
(ii) A clearing member FDIC-supervised institution must calculate a risk-weighted asset amount for any collateral provided to a CCP, clearing member, or a custodian in connection with a cleared transaction in accordance with requirements under Sec. 324.32.
(d) Default fund contributions--(1) General requirement. A clearing member FDIC-supervised institution must determine the risk-weighted asset amount for a default fund contribution to a CCP at least quarterly, or more frequently if, in the opinion of the FDIC-supervised institution or the FDIC, there is a material change in the financial condition of the CCP.
(1) General requirement. A clearing member FDIC-supervised institution must determine the risk-weighted asset amount for a default fund contribution to a CCP at least quarterly, or more frequently if, in the opinion of the FDIC-supervised institution or the FDIC, there is a material change in the financial condition of the CCP.
(2) Risk-weighted asset amount for default fund contributions to non-qualifying CCPs. A clearing member FDIC-supervised institution's risk-weighted asset amount for default fund contributions to CCPs that are not QCCPs equals the sum of such default fund contributions multiplied by 1,250 percent, or an amount determined by the FDIC, based on factors such as size, structure and membership characteristics of the CCP and riskiness of its transactions, in cases where such default fund contributions may be unlimited.
(3) Risk-weighted asset amount for default fund contributions to QCCPs. A clearing member FDIC-supervised institution's risk-weighted asset amount for default fund contributions to QCCPs equals the sum of its capital requirement, KCM for each QCCP, as calculated under the methodology set forth in paragraphs (d)(3)(i) through (iii) of this section (Method 1), multiplied by 1,250 percent or in paragraph (d)(3)(iv) of this section (Method 2).
(i) Method 1. The hypothetical capital requirement of a QCCP (KCCP) equals:[GRAPHIC] [TIFF OMITTED] TR10SE13.015 Where (A) EBRMi equals the exposure amount for each transaction
cleared through the QCCP by clearing member i, calculated in
accordance with Sec. 324.34 for OTC derivative contracts and
Sec. 324.37(c)(2) for repo-style transactions, provided that:(1) For purposes of this section, in calculating the exposure amount the
FDIC-supervised institution may replace the formula provided
in Sec. 324.34(a)(2)(ii) with the following: Anet = (0.15 x
Agross) + (0.85 x NGR x Agross); and(2) For option derivative contracts that are cleared transactions, the
PFE described in Sec. 324.34(a)(1)(ii) must be adjusted by
multiplying the notional principal amount of the derivative
contract by the appropriate conversion factor in Table 1 to
Sec. 324.34 and the absolute value of the option's delta, that
is, the ratio of the
change in the value of the derivative contract to the
corresponding change in the price of the underlying asset.(3) For repo-style transactions, when applyingSec. 324.37(c)(2), the
FDIC-supervised institution must use the methodology in
Sec. 324.37(c)(3);(B) VMi equals any collateral posted by clearing member i to
the QCCP that it is entitled to receive from the QCCP, but has
not yet received, and any collateral that the QCCP has
actually received from clearing member i;(C) IMi equals the collateral posted as initial margin by
clearing member i to the QCCP;(D) DFi equals the funded portion of clearing member i's
default fund contribution that will be applied to reduce the
QCCP's loss upon a default by clearing member i;(E) RW equals 20 percent, except when the FDIC has determined that a
higher risk weight is more appropriate based on the specific
characteristics of the QCCP and its clearing members; and(F) Where a QCCP has provided its KCCP, an FDIC-supervised
institution must rely on such disclosed figure instead of
calculating KCCP under this paragraph (d), unless
the FDIC-supervised institution determines that a more
conservative figure is appropriate based on the nature,
structure, or characteristics of the QCCP.
(ii) For an FDIC-supervised institution that is a clearing member of a QCCP with a default fund supported by funded commitments, KCM equals:[GRAPHIC] [TIFF OMITTED] TR10SE13.016
(A) Subscripts 1 and 2 denote the clearing members with the two largest ANet values. For purposes of this paragraph (d), for derivatives ANet is defined in Sec. 324.34(a)(2)(ii) and for repo-style transactions, ANet means the exposure amount as defined in Sec. 324.37(c)(2) using the methodology in Sec. 324.37(c)(3);
(B) N equals the number of clearing members in the QCCP;
(C) DFCCP equals the QCCP's own funds and other financial resources that would be used to cover its losses before clearing members' default fund contributions are used to cover losses;
(D) DFCM equals funded default fund contributions from all clearing members and any other clearing member contributed financial resources that are available to absorb mutualized QCCP losses;
(E) DF = DFCCP + DFCM (that is, the total funded default fund contribution); [GRAPHIC] [TIFF OMITTED] TR10SE13.017 Where (1) DFi equals the FDIC-supervised institution's unfunded
commitment to the default fund;(2) DFCM equals the total of all clearing members' unfunded
commitment to the default fund; and(3) K*CM as defined in paragraph (d)(3)(ii) of this section.
(B) For an FDIC-supervised institution that is a clearing member of a QCCP with a default fund supported by unfunded commitments and is unable to calculate KCM using the methodology described in paragraph (d)(3)(iii) of this section, KCM equals: [GRAPHIC] [TIFF OMITTED] TR10SE13.018 Where (1) IMi = the FDIC-supervised institution's initial margin
posted to the QCCP;(2) IMCM equals the total of initial margin posted to the
QCCP; and(3) K*CM as defined in paragraph (d)(3)(ii) of this section.
(iv) Method 2. A clearing member FDIC-supervised institution's risk-weighted asset amount for its default fund contribution to a QCCP, RWADF, equals: RWADF = Min 12.5 * DF; 0.18 * TEWhere(A) TE equals the FDIC-supervised institution's trade exposure amount to
the QCCP, calculated according to Sec. 324.35(c)(2);(B) DF equals the funded portion of the FDIC-supervised institution's
default fund contribution to the QCCP.
(4) Total risk-weighted assets for default fund contributions. Total risk-weighted assets for default fund contributions is the sum of a clearing member FDIC-supervised institution's risk-weighted assets for all of its default fund contributions to all CCPs of which the FDIC-supervised institution is a clearing member. [78 FR 55471, Sept. 10, 2013, as amended at 79 FR 20760, Apr. 14, 2014]