Ordinance On Large Exposures

Original Language Title: Bekendtgørelse om store engagementer

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Overview (table of contents)



Annex 1



Connected clients





Annex 2



Arrangements with underlying exposures





Annex 3



Calculation of capital requirements for large exposures with exceedances



The full text of the Ordinance on large engagementer1)

Under section 71, paragraph 2, § 148, no. 1-4 and 6, 175 (a), (2) and § 373, paragraph 4, of the financial business Act, see. lovbekendtgørelse nr. 885 of 8. August 2011, fixed: scope and definitions



§ 1. This Ordinance shall apply to: 1) financial institutions.

2) mortgage companies.

3) stockbroking companies.

4) Investment management companies.

5) Branches in this country by banks, building societies, stockbroking firms and investment management companies authorised in a country outside the European Union, which the community has not concluded an agreement with the financial area (third countries).

6) Groups, where the parent undertaking is one of the under nr. 1-4 listed companies or a financial holding company, see. § 5 (1) (8). 10-14, in the financial business Act, and where in accordance with section 171, paragraph 2, section 172. (2) section 173 (2) or section 174, paragraph 2, of the law on financial activities must be carried out in a consolidated statement.

7), where one of the Subgroups under nr. 1-4 listed companies or a financial holding company, see. § 5 (1) (8). 10-14 of the law on financial company is a parent undertaking, and where in accordance with section 171, paragraph 2, article 172, paragraph 2, article 173, paragraph 2, or section 174, paragraph 2, of the law on financial activities must be carried out in a consolidated statement.

8) Groups, where the parent undertaking is a financial holding company that is not a stock-brokerage, investment management, financial institution-or realkreditholdingvirksomhed, or a financial company covered by section 177 (1) of the financial business Act.

(2). In the following, the word "company" is used as a collective name for all the units mentioned in paragraph 1, to which the notice applies.

(3). Groups covered by paragraph 1, nr. 8, in which § 145 of the financial business Act does not apply, are only subject to the provisions of section 4, article 11, paragraph 6, and article 12 of this Decree.

§ 2. For the purposes of this order: 1) commitment: as defined in § 5 (1) (8). 16, in the financial business Act, IE. the sum of all balances, involving a credit risk for the company, as well as shares, with the exception of the following balances: (a)) By currency transactions: Balances, which is concluded in the context of the general settlement of a transaction for a period of 48 hours after payment has been made.

(b)) By the purchase or sale of securities: Balances, entered into in connection with the general settlement of a transaction for a period of five working days after the payment has been made, or the securities are delivered, depending on whichever is first.

(c)) by the payment management, including implementation of payment orders, clearing and settlement of securities in any currency and correspondent bank or offers of clearing, settlement and deposition of financial instruments to customers: Balances relating to delayed receipt of funding, and other balances arising from client activity, and which is not longer than the following business day.

d) By payment management, including implementation of payment orders, clearing and settlement of securities in any currency and correspondent bank: Intraday balances with institutions that provide these services.

2) Credit risk: the risk of suffering a financial loss as a result of the default of their counterparts from payment obligations.

3) Customer: any natural or legal person who has an involvement with the company.

4) trading book: as defined in sections 6 and 7 of the Ordinance on capital adequacy.

5) securities financing instruments: margenlån, repurchase transactions and transactions relating to the lending or borrowing of securities or commodities as defined in section 4 of the Ordinance on capital adequacy.

6) forward transactions: as defined in section 4 of the Ordinance on capital adequacy.

7) covered bonds: covered bonds, mortgage backed securities issued no later than 31 December 2006. December 2007, cash bonds issued by Danish ship credit no later than 31 December. December 2007, as well as other covered bonds, see. Annex VI, part 1, paragraph 68, to Directive 2006/48/EC, as defined in annex 3 to the Ordinance on capital adequacy.

8) collective investment schemes: schemes covered by section 1 of the Act on investment associations, etc.

9) Securitiseringspositioner: Exposures against securitiseringer as defined in annex 11 to the Ordinance on capital adequacy.

10) Pool schemes: schemes covered by the Executive order on pool schemes and other tax favored savings forms, etc., see. section 50 of the financial business Act.

Statement of commitment



§ 3. The total commitment with a single customer is calculated by summing the exposures that are directly concluded with the customer, with indirect exposures to the client in the form of the underlying positions in units of collective investment schemes and in the form of underlying exposures in the securitiseringspositioner. The total involvement with a group of connected clients is calculated by summing the company's exposures to the customers, which are included in the Group of connected clients.

(2). A group of connected clients shall be delimited and identified in accordance with Annex 1.

(3). The estimation of indirect exposures through underlying positions in units of collective investment schemes and securitiseringspositioner must be carried out in accordance with Annex 2.

§ 4. The individual parts of the exposure shall be calculated in accordance with the rules laid down in the notice on the financial reports of credit institutions and stockbroking companies et al., except as otherwise provided in this Ordinance, without prejudice. However, section 145, paragraphs 9 and 10 of the law on financial business.

(2). Off-balance-sheet items referred to in article 6. Annex 4 to the Ordinance on capital adequacy, are included in the statement of engagement with the nominal value after provisions.

(3). Securities and financial instruments included in pool schemes, where all of the positive or negative returns of the pool falls to or covered by the customers, are not included in the exposure and loss.

(4). Derivative financial instruments are included in annex 17 to the Ordinance on capital-coverage, as well as forward transactions to be included in the exposure to the counterparty in accordance with the rules for the estimation of counterparty risk in Chapter 6 of the Executive order on capital adequacy.

(5). Securities and financial instruments included in the Declaration as lending exposure. The company has authorization to use the internal model method for counterparty risk (EPE models), pursuant to section 49 of the Ordinance on capital adequacy, the company may instead use this model by determining exposures arising from securities and financial instruments.

(6). If a purchase or sale of securities or commodities, including spot transactions, forward transactions and other businesses with physical delivery, not settled at the latest at the beginning of the sixth working day following the agreed settlement date, the market value of the securities in question on the assessment day minus the agreed settlement price in the exposure to the counterparty, if the difference is positive. In case of sale of securities is calculated exposure as the agreed settlement price minus the relevant securities market price on the day of Declaration, if the difference is positive.

(7). If the company has paid for securities or commodities before delivery or delivered securities or currency in the trading book, until it has received payment, the amount due are included in the exposure to the counterparty from the beginning of the sixth working day following the first contractual repayment date and forward to the receivable, securities or raw materials either paid, delivered or written off.

(8). For foreign currency transactions, see paragraphs 6 and 7 shall apply by analogy, however, included the commitment from the beginning of the third business day.

(9). Securities included in the statement of commitment by the issuer of the security from the time of the conclusion of the trade.

Paragraph 10. Use the company annex 12 or Annex 15 to the capital balance of the statement of the risk-weighted items for trading book, company for securities included in the trading book, take account of the difference, if positive, between long and short positions in all securities issued by the same issuer, where position in each of the various securities being calculated according to the methods set out in annex 12 to the Ordinance on capital adequacy.

Paragraph 11. Use the company not annex 12 or Annex 15 to the capital balance of the statement of the risk-weighted items for trading book, the company must take into account securities included in the trading book in the exposure to the issuer by the same method, as it takes into account the securities non-trading book.

Paragraph 12. By underwriting part of the engagement with the issuer of the security net of positions in emissions, which third parties have subscribed or sub-underwritten on the basis of a formal agreement.

Deduction of special secure parts




§ 5. The company may, by statement of exposure limits in section 145 (1) and (2) of the financial business Act ignore the following: 1) exposures to central Governments, central banks, or public entities which have nulvægts status after the standardised approach for credit risk, see. Annex 3 to the Ordinance on kapitadækning.

2) exposures to international organizations or multilateral development banks, which have nulvægts status after the standardised approach for credit risk, see. in annex 3 to the Ordinance on capital adequacy.

3) exposures to Danish municipalities and regions, Greenland, the Faroe Islands, and Greenland and Faroese Municipalities and regional Governments and local authorities in the European economic area (EEA), which have nulvægts status after the standardised approach for credit risk, see. Annex 3 to the Ordinance on capital adequacy.

4) exposures subject to the permit requirement under section 182, paragraph 1 of the law on financial business.

5) exposures which are secured by deposits in the lending company or a credit institution which is the parent undertaking or a subsidiary.

6) stockbroking companies and the unit collecting societies exposures secured by mortgages on deposited margin.

7) exposures secured by mortgages on certificates of deposit issued by the lending company or by a credit institution which is the parent undertaking or a subsidiary of the lending business, and which are deposited with one of these companies.

8) exposures arising from undrawn credit facilities that are classified as off-balance-sheet items with low risk in accordance with annex 4 to the Ordinance on capital adequacy, and where there is an agreement with the client, according to which the facility can only be exploited if it is satisfied that it will not result in the article 145, paragraph 1 or, where appropriate section 145 (2) of the financial business Act, the specified limits are exceeded.

9) covered bonds.

10) 80 per cent of the value of the exposures to regional governments or local authorities of the European economic area (EEA), which according to the home country's capital adequacy rules shall be assigned a 20% risk weight under the standardised approach for credit risk, see. Annex 3 to the Ordinance on capital adequacy.

11) non-subordinated exposures to credit institutions located in the European economic area (EEA) provided that these exposures do not have a longer duration than for the subsequent trading day and agreed in Danish, Norwegian, Swedish or Icelandic krona.

12) 50 percent of exposures, consisting of guarantees in the face of Denmark's National bank or a clearing in connection with payment processing by the settlement of securities transactions.

13) 50 per cent of the emissions warranties with an original maturity of less than one year.

14) 50% of warranties made for VP Securities a/s (VP) capital base.

15) Received, statutory registration guarantees for mortgage credit institutions up to the final registration in the land register, and which are not taken into account in the solvency statement.

Deduction of received collateral, guarantees, etc.



§ 6. The effect of received collateral, guarantees, etc. can be included pursuant to §§ 7-8 below, if the company meets the minimum requirements and the conditions for taking into account the relevant securities, guarantees, etc., laid down in annex 7 to the Ordinance on capital adequacy regulation. However, paragraph 2.

(2). The company uses the method described in section 8, paragraph 3, an entity shall comply with the relevant requirements of Annex 8 to the Ordinance on capital adequacy on own estimates of lgds (LGD) for the purpose of calculating the impact of financial securities.

(3). The company has issued a credit linked note, which satisfies the conditions laid down in annex 7, paragraphs 29-34, to the Ordinance on capital adequacy, the credit protection shall be counted as cash collateral in accordance with the methods set out in section 8 (1) and (3) of this Ordinance.

(4). The company has entered into a nettingaftale relating to on-balance-sheet debts, complying with the provisions of annex 7, paragraph 107, the Ordinance on capital adequacy, the credit protection shall be counted as cash collateral in accordance with the methods set out in section 8 (1) and (3) of this Ordinance.

(5). Where the term "guarantee" is used in sections 7-8 below, this also includes credit derivatives, which complies with the requirements in order to be counted as credit protection by the estimation of the risk-weighted items in accordance with Annex 7, paragraphs 28-34, to the Ordinance on capital adequacy, with the exception of credit linked notes.

§ 7. Where an exposure is guaranteed by a third party, or secured by a financial guarantee issued by a third party, the company may, by statement of exposure limits in section 145 (1) and (2) of the financial business Act, 1) treat the portion of the exposure which is guaranteed as having been concluded with warranty rather than with the customer, provided that the unsecured engagement with the guarantor would be assigned a risk weight equal to or lower than the risk weight of the unsecured engagement with the customer in accordance with the standard method for credit risk in accordance with annex 3 to the Ordinance on capital adequacy and 2) treat the portion of the exposure which is covered by the market value of the collateral, as being entered into with the issuer of the security rather than with the customer, provided that the portion of the exposure which is covered by the security, would be assigned a risk weight equal to or lower than the risk weight of the unsecured engagement with the customer according to the standardised approach for credit risk in accordance with annex 3 to the Ordinance on capital adequacy.

(2). If your company uses the method described in paragraph 1, no. 1, for the guarantees, the company must 1) adjust the value of the exposure deemed to be covered, in accordance with the method set out in annex 7, paragraph 18, to the Ordinance on capital adequacy, if the guarantee is agreed in a currency other than that in which the exposure is agreed, 2) adjust the value of the exposure deemed to be covered by the warranty, in accordance with the method set out in annex 7 , points 21-28, notice of capital adequacy, if the warranty duration is shorter than the maturity, and 3) treat the portion of the exposure which is not covered by the warranty, as an engagement with the customer.

(3). If your company uses annex 12 and annex 15 to the Ordinance on capital adequacy by the solvency statement, the company may not use the method described in paragraph 1, no. 2, on the part of the exposure relating to items included in the trading book.

(4). If the duration of protection is shorter than the maturity, the company may not use the method described in paragraph 1, no. 2.

§ 8. When the conditions set out in paragraphs 5-7 are met, can the company in determining the exposure limits in section 145 (1) and (2) of the financial business Act apply the fully adjusted the size of the commitment in accordance with, respectively, the financial collateral comprehensive method of the basic regulation. Annex 7, paragraph 58-96 and paragraph 107, the Ordinance on capital adequacy, and the method of estimation of exposure size for securities financing instruments, etc. in netting, see. Annex 10 to the capital adequacy Ordinance.

(2). The company uses the fully adjusted the size of the commitment in accordance with paragraph 1, the company may not simultaneously apply the method set out in section 7, paragraph 1, no. 2, for other exposures, unless the company also by solvency statement similarly use both the financial collateral comprehensive method and the simple method for financial securities.

(3). Use the company by solvency statement own estimates for losses in case of default (LGD) for an exposure category, see. § § 19-33 of Ordinance on capital adequacy, the company may apply to the FSA for authorization to use own estimates of the effects of financial collateral by the estimation of the non-trading book exposures compared to the limits in section 145 (1) and (2) of the financial business Act. A permit requires 1) that the method of calculating the impact of financial securities by the estimation of the size of the exposure is consistent with the method that the company employs for estimation of LGD by solvency statement, 2) that the company can estimate the effects of financial collateral on their exposures, which can be separated from other aspects of importance for losses in case of default (LGD), 3) to the company's estimates of the impact of financial guarantees is appropriate to apply for reduction of exposures for the purposes on compliance with the exposure limits in section 145 (1) and (2) of the financial business Act, and 4) to the conditions set out in paragraphs 5-7 are met.

(4). The company uses the method described in paragraph 3, the company may not at the same time, use the methods set out in paragraph 1 or in section 7, paragraph 1, no. 2, for other exposures.


(5). A company using the methods set out in paragraph 1 or 3, shall regularly conduct stress tests credit risk concentrations, including in relation to the selling price of securities, included in determining the reduction in exposure. Stress tests should include risks arising from potential changes in market conditions, which could have a negative effect on both the sufficient capital base, see. section 124 (1) and section 125 (1) of the financial business Act, which for the possibilities for realization of securities in stressful situations. The company must prove that they carried out stress-tests are adequate and appropriate for the assessment of such risks.

(6). If the stress tests in accordance with paragraph 5 indicates a lower realisable value of collateral in stressful situations than the minimum value will be taken into account for the calculation of the commitment in accordance with paragraphs 1 and 3, the value of the security shall be reduced accordingly by determining the exposure size compared to the limits given in section 145 (1) and (2) of the financial business Act.

(7). A company that uses the method referred to in paragraph 1 or 3, shall establish the following business-times for the purpose of management of risk concentrations: 1) business processes for managing risks arising as a result of non-conformity between the maturity of the exposure and the maturity of the asset, the lodging of security.

2) business processes for handling situations where stress tests indicates a lower realisable value of collateral in stressful situations than the one included in accordance with the method described in paragraph 1 or, where applicable, paragraph 3.

3) business processes for the management of concentration risk arising from the use of credit risk-reducing methods, including large indirect credit exposures, in the face of an issuer of securities, which are designed for safety.

§ 9. The company can reduce exposure by up to 50 per cent of the value of a residential property, if at least one of the following conditions have been met, see. However, paragraph 2:1) the exposure is secured by a mortgage of a residential property which is or will be occupied or let by the owner, including second homes and farmhouses for farm properties, or by shares in Finnish housing companies, operating in accordance with the Finnish housing company Act of 1991 or subsequent equivalent legislation.

2) the commitment concerning a lease transaction in which the lessor retains full ownership of the leased property, as long as the lessee has not exercised a possible purchase option (2). The conditions set out in annex 3, paragraph 16, to the Ordinance on capital adequacy should be met in order for the mortgage on residential property may reduce the exposure value by virtue of paragraph 1.

§ 10. The company can reduce exposure by up to 50 per cent of the value of Office and commercial premises as well as agricultural and forest properties, nurseries, etc., if at least one of the following conditions have been met, see. However, paragraphs 2 to 4:1) the exposure is secured by a mortgage in an Office and business property or in an agricultural and forestry estate, horticulture, etc., or by shares in Finnish housing companies, operating in accordance with the Finnish housing company Act of 1991 or subsequent equivalent legislation on Office and commercial premises or agricultural and forestry property, nurseries, etc.

2) the commitment concerning a leasing transaction by that Office and business property or agricultural and forestry estate, horticulture, etc.

(2). Office and business property or agricultural and forestry property, nursery, etc., must be completed, on loan and must be rent-bearing.

(3). The conditions set out in annex 3, paragraph 16 to the Ordinance on capital adequacy should be met before a mortgage Office and commercial premises or in the agriculture and forestry buildings, nurseries, etc. may reduce the exposure value by virtue of paragraph 1.

(4). The value of the property must not materially depend on the borrower's credit quality. It is furthermore a condition that the risk of the borrower does not materially depend on the underlying property value, but rather by the borrower's basic ability to repay in some other way.

Exceeding of exposure limits for exposures in the trading book



§ 11. An application under section 145, paragraph 7 of the financial business Act for authorization to exposures in the trading book may exceed the exposure limits in section 145 (1) and (2) of the financial business Act, shall contain a statement of reasons for the company's need for the possibility of exceeding the exposure limits with indication of the instruments in the trading book likely to cause exceedances , and an indication of any clients or groups of connected clients to be covered by an option for the overshoot.

(2). FSA authorisation under section 145, paragraph 7, of the law on financial business will more than could be obtained for a period of one year, after which exceedances of the exposure limits will require a renewed permit.

(3). The company has authorization from the Danish financial supervisory authority in accordance with paragraph 2, the company must comply with the following: 1) the company's commitment with the client or group of connected clients outside the trading book must be within the limits of section 145 (1) and (2) of the financial business Act, so that the exceedance alone derived from the trading book.

2) the company must meet an additional capital requirement to cover the overrun as ascertained in accordance with the method described in annex 3 to this order.

3) Where the breach has had a duration of 10 days or less, the company's involvement in the trading book with the client or group of connected clients, at a maximum of 500 per cent of the company's capital base.

4) the sum of the overruns of the exposure limits in the trading book, which has a duration of more than 10 days, may not exceed 600% of the company's capital base.

5) the company shall, in the context of reports submitted to the Danish financial supervisory authority under section 11 below to report all cases where exposure limits in section 145 (1) and (2) of the financial business Act has been exceeded in the past three months, with an indication of the size of the overdraft and the identity of the client.

(4). The company shall without undue delay submit a report to the FSA for reductions in exposures in the trading book, where the breach has had a duration of more than 10 days, and where the reduction is based on the fact that the exposure temporarily sold to another legal entity, or relies on transactions closing using the oncoming positions, which creates other exposures. The statement must demonstrate that the reduction did not have an intention to circumvent the elevated capital requirements for exceedances by more than 10 days in accordance with the Executive order on Annex 3, paragraph 4, of the basic regulation. (1). 2. Reporting



§ 12. The company must report exposures covered by section 145 (4) and (5) of the financial business Act to FSA per at the quarter-end. The reports must be FSA not later than 20 working days after the end of the quarter. Year-end reporting must, however, be the Danish financial supervisory authority not later than 30 working days after the end of the year.

(2). Exposures to the undertakings included in the consolidation, and as fully under section 145, paragraph 8, of the law on financial activities are excluded from the exposure limits in section 145 (1) and (2) of the financial business Act, by notification pursuant to paragraph 1 shall be reported as exposures to full deduction of special secure parts.

(3). The reports must be made on machine-readable or electronic medium.

(4). The reports must be approved by the company's Executive Board.

(5). The company is a parent company, the company must also report any exposures at group level is subject to the reporting obligation pursuant to section 145 (4) and (5) of the financial business Act.

(6). The company is a financial holding company that is not a stock brokerage, investment-ringsforvaltnings-, financial institution-or realkreditholdingvirksomhed, or a financial company covered by section 177 (1) of the financial business Act, and where section 145 of the financial business Act does not apply, see. section 1, paragraph 3, an entity shall, within 30 days after the end of the year report exposures per year-end at group level is subject to the reporting obligation pursuant to section 175 (a) of the financial business Act. Exposures reported according to this paragraph shall be determined before deduction of special secure parts and received securities and without regard to the provisions of section 3 of this Ordinance on connected clients or surcharges for any indirect exposures to the client in the form of the underlying positions in units of collective investment schemes or in securitiseringspositioner. When calculating the parts of exposures, which consists of repurchase transactions, lending or securities or commodities borrowing, however, be taken into account after deduction of received collateral, guarantees, etc. in accordance with the provisions in paragraph 6-8 of this notice.

Criminal provisions, entry into force and transitional provisions



§ 13. Violation of §§ 3 and 4, article 6, paragraphs 1 to 3, article 7, paragraphs 2 to 4, article 8, paragraphs 2 and 4-7, § 9, § 11, paragraphs 3 and 4, and section 12 is punishable by a fine.

(2). That can be imposed on companies, etc. (legal persons) criminal liability according to the rules laid down in the Penal Code Chapter 5.

§ 14. The notice shall enter into force on the 1. December 2011.


(2). At the same time repealed Executive Order No. 1232 of 31. October 2010 on large exposures (3). Businesses may until 31 March 2006. December 2012 in determining exposure limits under section 145 (1) of the financial business Act disregard 80% of exposures has been concluded before 31 December 2006. December 2009 with credit institutions, stockbroking firms, investment management companies, stock exchanges, authorised marketplaces and clearing houses, which are located in countries with nulvægts status in accordance with the standardised approach for credit risk, see. Annex 3 to the Ordinance on capital adequacy.

(4). Businesses may until 31 March 2006. December 2015 to process arrangements with underlying exposures acquired prior to 31 December 2006. January 2010 in accordance with the rules on large exposures, which was in force on 30 June. December 2010 instead of in accordance with the rules set out in annex 2.

The Danish financial supervisory authority, the 17. November 2011 Ulrik Nødgaard/Kristian Vie Madsen



Annex 1 connected clients scope



1) this annex provides for connected clients, see. § 3, paragraph 2.



Definition



2) By a group of connected clients shall mean:



a) two or more natural or legal persons, who constitute a single risk because one of them engaged in direct or indirect control over the other or others, see. paragraph 3, or



(b)) two or more natural or legal persons, none of which exercises control over the other or the other, but where there is such mutual relations that there is likelihood that if one gets into financial difficulties, will the other or the other also have economic difficulties.



Direct or indirect control (re item 2 (a))



3) A customer shall exercise direct or indirect control of another or others, see. paragraph 2 (a), when:



a) customer has an impact equivalent to a parent company's direct and indirect influence in a group, see. the in clause 5 (1) (8). 7 of the law on financial undertaking mentioned connections, or



(b)) the customer has the competence to coordinate the management of a company with the leadership of another undertaking in order to achieve a common goal, for example, where the same person is involved in the management or the Board of Directors of two or more companies.



4) it follows from the control criterion in paragraph 2 (a) that a customer can be covered by two or more incidentally, independent groups of connected customers, for example if:



(a)) a customer is owned 50% by two, incidentally, independent customers,



(b)) there is an owner agreement that ensures participants vote majority, so that all the independent customers each is considered to have a dominant influence over the company, or



c) a customer is a partner in more than one partnership, where it has a dominant influence, along with the other partners.



5) it follows from the control criterion in paragraph 2 (a), to devices that are managed by the same entity or person must be regarded as connected clients. The managing entity or person can have its function either through mutual agreement between the managed devices, through by-laws, or as a result of personal conflicts in management. However, this does not apply if the managing entity is a State, a local or a regional authority with nulvægts status in accordance with the standardised approach for credit risk, see. Annex 3 to the Ordinance on capital adequacy.



6) Control criterion defined in paragraph 2, point (a), does not include situations where there is a transient controlling influence, but must reflect a long term relationships. Voluntarily renounce to exercise controlling influence in the form of, for example, statements to this effect have not exempting from treating customers as connected.



Economic interconnectedness (re item 2 (b))



7) Economic interconnectedness in paragraph 2 (b), include the interconnectedness between customers as a result of a customer's reliance on another customer's ability to pay or as a result of the fact that customers are exposed to the same specific risk factors such as dependence on the same main supplier, same the main customer or same funding source. Economic interconnectedness in paragraph 3 (b), excludes the fact that customers are exposed to the same general risks, such as, for example, that they are located in the same geographical area, or are within the same industry.



8) Economic interconnectedness in paragraph 2 (b), requires common risks or dependency, as the customer cannot avoid or overcome without getting into payment difficulties. In addition, risk or dependency have a such that a trigger must involve a high risk of customer's bankruptcy.



9) the company must pay special attention to a possible economic interconnectedness between customers in the following cases:



(a)) when a customer in whole or in part have guaranteed another customer's commitment, or otherwise committed to a second customer engagement, and if the exposure has such a size that the guarantor will probably default on its obligations to the company, in the event of a claim under warranty or obligation.



(b)) the owner of a property and the tenant who pays the bulk of the rent, and where the rental income is a primary source of income for the owner, and where it is difficult to find new tenants.



c) a borrower and his/her customer, when a significant portion of the sales goes to a single client, which is difficult to replace.



(d)), A manufacturer and retailer, which account for a substantial share of the producer's turnover, and how it is time consuming to find a new manufacturer, dealer, respectively.



e) Borrowers with common customer base, and where there is a very small number of customers, and where there are limited opportunities for borrowers to find new customers.



f) If company becomes aware that another financial undertaking treats two or more customers as interrelated.



g) For retail customers:



i. a borrower and his medlåntagere



II. Cohabiting persons



10) Economic interconnectedness as a result of the same funding source occurs if two or more customers receive all or most of their funding from a single source, which is not or only difficult – can be replaced, and where financing source termination will result in a high probability of default. The fact that two clients have the same bank connection, does not imply economic interconnectedness since the bank connection will normally be replaced without threatening customers ' solvency. Nor does the fact that two or more customers are financing their activities through the issuance of securities in the same market, involves the interconnectedness, unless we are talking about the same investor or the same small circle of investors, there is no or only very difficult can be replaced.



11) Economic interconnectedness as a result of the same funding source may also be present for legal entities with a special purpose (Spvs) established by the same bank (or the company itself). This will be the case if SPV'erne is dependent on liquidity facilities or guarantees from the same bank, which is difficult to be replaced, or if those Spvs need ongoing refinancing through the issuance of securities or money market instruments (commercial papers) through a given bank, which is difficult to replace.



Business processes and controls for identification of connected clients 12) identification of possible interconnectedness between customers should be an integral part of the credit allocation process and the monitoring of credit area, including with a view to obtaining an overview of and understanding of the company's concentrations of risks. The greater the exposure is with a single customer, the more intensive the company must examine the interconnectedness with other customers. The company must prove its investigations of possible interconnectedness to other customers for all exposures that exceed 2 percent of the basic capital.



13) It is not a requirement that the company systematically to collect information on whether the company's customers share a common funding source, but the company must utilize available information in this area.



14) the company shall use available public information as well as take advantage of the knowledge that the company's employees are in possession of to identify the interconnectedness between customers. The company must also take measures to ensure that the collection of information about the interconnectedness between customers is carried out in a reasonable extent, depending on, among other things. the size of the customer's commitment and risk.



15) the company must be able to demonstrate that its business processes to identify the interconnectedness between customers are appropriately aligned to its business and customer base. Business corridors must be continuously updated. The company must ensure that the company's credit risk monitoring employees and employees receive the necessary training to identify the interconnectedness between customers.



16) the company should monitor potential changes in the interconnectedness between customers in connection with the periodic review of engagement, as well as in connection with a significant expansion of the exposures.



17) Where the company has information about the interconnectedness between customers, this information must always be exploited regardless of the size of the customer's commitment.



Annex 2


Arrangements with underlying exposures 1) this annex provides for the calculation of indirect exposures in connection with collective investment schemes and securitiseringer, which included underlying exposures, see. section 3, paragraph 3.



2) the company must examine the underlying exposures in collective investment schemes and securitiseringer in order to identify whether these are connected with other of the company's exposures, including exposures underlying other arrangements with underlying exposures. The company must use one of the following methods:



a) Method based on knowledge of the underlying exposures (look-through): the company identifies and monitors continuously the customers who are behind the underlying exposures and consolidates these exposures with the company's other exposures to the same customer.



(b)) Method based on partial knowledge of the underlying exposures: the company uses look-through, as described under (a), on the underlying exposures, where it knows the identity of the customer behind the engagement, and treats the remaining exposures as unknown exposures in accordance with the method set out in paragraph (c) below.



c) Method based on ignorance of the underlying exposures: If the greatest commitment in the scheme constitute less than 5 percent of all engagements in the scheme, the company may disregard a possible interconnectedness between the customers behind the underlying exposures in the scheme and the company's other customers. If the largest commitment in the scheme constitute 5 per cent or more of all exposures in the scheme together, or if the company cannot rule out the possibility that this is the case, on the contrary, the entity shall treat all clients behind the exposures in the scheme as one total unknown customer. This unknown customer shall then be treated as interconnected with all other unknown customers calculated in a similar way in other systems with unknown underlying exposures.



d) Method based on knowledge of the scheme's investment policy: the company may treat the plan as a separate risk that is independent of other exposures of the company, if it can demonstrate, for example through prospectuses or by-laws of the scheme, that none of the customers behind the underlying exposures in the scheme, either directly or indirectly, are connected with other customers in the company's portfolio with a commitment of more than 2 per cent of the company's capital base , including other customers behind the underlying exposures in other schemes.



3) regardless of the treatment of the underlying exposures in a system of underlying exposures, the company must, at the same time treat the system as a single risk, similar to all of the underlying exposures in the scheme are interrelated.



4) the company must be able to demonstrate that a choice of the method described in paragraph 2, point (c), based on ignorance of the underlying exposures are not justified by an interest in avoiding consolidation of underlying exposures in the system of company's direct exposures to customers.



5) the company shall apply the following principles, when the methods set out in paragraph 2 is used:



(a)) For arrangements with underlying exposures, where the underlying exposures even has arrangements with underlying exposures must be the criterion in paragraph 2, point (c), for the assessment of whether the largest commitment in the scheme constitute less than 5 percent of all exposures are measured on the basis of the underlying exposures in the underlying systems.



b) Monitoring must be done on a regular basis and at least once a month.



(c)) For collective investment schemes which are not securitiseringer, the size of the underlying exposures in the scheme are assessed proportionately in accordance with the size of the company's total commitment to the scheme.



(d)) For arrangements securitiseringer, must the underlying exposures are included with the full amount by which their inclusion in securitisation, shall not exceed an amount equal to the size of the company's total commitment with securitisation, see. However, subparagraph (e).



e) For schemes that are securitiseringer, the company may take into account the effect of the credit protection, which subordinated tranches, which are not held by the company itself, implies for leading tranches. Each of the underlying exposures, calculated in accordance with one of the methods set out in paragraph 3, can thus be reduced by the amount of the subordinated tranches in the securitisation, which are not held by the company itself.



6) a company that reduces the underlying exposures in securitiseringer using the method described in paragraph 5, point (e), must continuously monitor changes in the size of the subordinated tranches, which are not held by the company itself. The company must be able to demonstrate that it is able to carry out such a continuous monitoring and is able to timely adjust the size of its exposures in relation to the limits in section 145 of the financial business Act, if the credit protection from the subordinated tranches lapse as a result of losses in the underlying exposures.



Annex 3 Statement of capital requirements for large exposures of exceedance 1) this annex provides for the establishment of additional capital requirements for exposures exceeding the exposure limits in section 145 (1) and (2) of the financial business Act, see. section 10, paragraph 3, nr. 2.



2) the excess of the exposure limit shall be calculated by selecting those components of the total engagement in the trading book to the client or group of connected clients, as have the highest risk weight for specific risk in accordance with annex 12, paragraph 42-57 to the Ordinance on capital adequacy, or, where applicable, the highest risk weight for counterparty risk in accordance with Annex 16 to the Ordinance on capital adequacy , so that the sum of the selected parts of the exposure corresponds to the total exceeding of exposure limit.



3) Where the breach has had a duration of 10 days or less, be summed up by the additional capital requirement to the overrun, as a supplement of 200 per cent of risk-weighted items associated with the individual parts of the exposure selected in accordance with paragraph 2.



4) Where the breach has a duration of more than 10 days, the individual parts of the exposure selected in accordance with paragraph 2 shall be allocated on the rows in table 1, in such a way that the parts with the lowest risk weight for specific risk in accordance with annex 12, paragraph 42-60, to the Ordinance on capital adequacy or, where relevant, the risk weight for counterparty risk in accordance with Annex 16 to the Ordinance on capital adequacy are treated as the least overrun, they share with the next smallest risk weight, as the next smallest overrun, and in the same way in increasing order. The appendix to the risk-weighted items is calculated as the sum of the specific risk weight under annex 12, to clause 42-60, to the Ordinance on capital adequacy or, where relevant, the risk weight for counterparty risk in accordance with Annex 16 to order on capital coverage multiplied by the corresponding factor in column 2 of table 1.

Table 1 the overrun (measured in percent of the basic capital)





Multiplication factor







Up to 40%





200%







From 40% to 60%





300%







From 60% to 80%





400%







From 80% to 100%





500%







From 100% to 250%





600%







Over 250%





900%









Official notes 1) Ordinance contains provisions implementing parts of a European Parliament and Council Directive 2002/87/EC of 16. December 2002 (conglomerates directive), the official journal of the European Union 2003, nr. L 35, page 1, parts of the European Parliament and of the Council Directive 2006/48/EC of 14. June 2006 (banking directive), the official journal of the European Union 2006, nr. L 177, page 1, parts of the European Parliament and of the Council Directive 2006/49/EC of 14. June 2006 (CRD), the official journal of the European Union, 2006, nr. L 177, page 201, parts of Commission Directive 2007/18/EC of 27. March 2007, the official journal of the European Union 2007, nr. L 87, page 9, and parts of the European Parliament and of the Council directive 2009/111/EC of 16. September 2009 (CRDII), the official journal of the European Union 2009, nr. L 302, page 97.

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