Exposure Limit Enforcement Rules

Original Language Title: Riska darījumu ierobežojumu izpildes noteikumi

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Read the untranslated law here: https://www.vestnesis.lv/ta/id/157207

Financial and capital market Commission Regulation No 62, Riga, 2 May 2007 (pr. No 19 2. p.)
The exposure limit of the implementing provisions Issued under the law of credit institutions article 50.8 sixth and financial instruments market law 122. the fourth part of article i. General questions 1. rules determine the law of credit institutions, article 35, first paragraph, point 3, 39, 40, 42 and 43. Article banking and regulatory requirements on financial instruments market law laid down in article 122 of the investment brokerage companies regulatory requirements. The provisions of the banks and investment brokerage company (hereinafter referred to as the authority) respect the individual.
2. the terms used in the regulations comply with the financial and capital market Commission on 2 May 2007 the Regulation No 60 "minimum capital requirements rules" (hereinafter referred to as the MKP) usage of terms.
3. The rules are binding on the Republic of Latvia registered banks and those in the Republic of Latvia registered investment brokerage firms, which are applicable to capital adequacy regulatory requirements in accordance with the financial instruments market law article 121 of this Act taking into account the provisions of article 119.1.
4. the authority shall observe the laws referred to in paragraph 1 in specific exposure limits permanent. If exposure exceeds these limits, the authority shall promptly notify the financial and capital market Commission (hereinafter the Commission), adding the report action plan to restore compliance with the limit that the deadlines agreed by the Commission.
5. If not otherwise specified in the rules, the exposures evaluated in accordance with the Commission on 24 February 2006, the Regulation No. 46 "banks, investment companies and investment management company of the annual accounts and the consolidated annual report".
II. Exposure restrictions Of authority 6 exposures are to be considered as active items in the balance sheet and off-balance-sheet items reported transactions and derivative instruments, referred to in rule 89, MKP 90.92, and without taking into account the degree of risk or degree of adjustment, except: 6.1 risk transactions which in accordance with the requirements of the provisions of the type MKP capital reduction;
6.2. the requirements for the establishment of foreign currency as a result of sale or purchase, the normal invoicing when the authority has already fulfilled its obligations, but has not yet received payment of the counterparty, and the Authority's payment last no more than two working days (starting with the third working day, such requirements constitute an exposure);
6.3. requirements which results in a purchase or sale of securities led to regular payments, the Authority made a payment or delivered securities, but not yet received from the counterparty's securities or payment, and after the payment or delivery of securities last no more than five working days (starting with the sixth working days, such requirements constitute an exposure).
7. the exposure value shall be determined as follows: 7.1. balance sheet asset items presented to the transactions referred to in the provisions of paragraph 89 of the MKP, – according to the carrying amount of the transaction;
7.2. off-balance sheet items reported to the transactions referred to in rule 90, paragraph MKP, – according to the residual value of the transaction, i.e. the value of off-balance-sheet items that reduced the amount of savings you have created, not taking into account the degree of adjustment;
7.3. derivative instruments, which are referred to in the provisions of paragraph 92 of the MKP, – according to the exposure value calculated in accordance with one of the provisions of annex 1 of the MKP in part 2 of the methods provided.
8. By way of derogation from the requirements of section 7, the authority that the invoice for position risk, settlement and counterparty credit risk capital requirements for the trading book exposures in accordance with the provisions of title II of the MKP 3. chapters 1-3, part or, if the Commission allows using internal models, not the client's trading portfolio (counterparty) exposure value amount shall be determined in accordance with the provisions of point 7, but trading portfolio where the client's exposure value is calculated as the total value of such : the entire client issued 8.1 financial instruments net long position in the total and net short position totals the difference, if it is positive. Each financial instrument net position is calculated in accordance with the provisions of title II of the MKP 3 part 1 of chapter;
8.2. the client issued debt securities and equity securities, net position, which the Securities created during initial deployment. The initial deployment is the net position in accordance with the position of the initial deployment, reduced for securities that are already deployed or put on the market for the initial deployment of a third party;
8.3. the portfolio of trade settlement risk and counterparty risk exposures to the client (mutual group of connected clients) value calculated in accordance with the provisions of title II of the MKP 3. Chapter 2 or 3 of the part. Determining the value of such exposure in accordance with the provisions of paragraph 236 MKP, apply only to the standardised approach to credit risk.
9. When the authority engages in client debt securities or equity securities business in the initial deployment, it shall establish and comply with the following business internal control and monitoring procedures in the period between the date of the reception of its commitments and the first working day of the deployment.
10. One client restriction by the exposure value is with this customer made not referred to in paragraph 7, the trading book and the trading book exposures total, if the authority has received permission to exclude the position risk, settlement and counterparty credit risk capital requirements for the trading book exposures. If the authority of the invoice for position risk, settlement and counterparty credit risk capital requirements for the trading book exposures, its one client restriction by the exposure value is with this customer made not referred to in paragraph 7, the trading book referred to in point 8 and trading book exposures.
11. the interrelated group of clients limits the exposure value is included in the client group risk business value.
12. With the authority of persons under restriction by the exposure value is all risk of such persons, the total value of the transactions.
13. the body's exposure to the client, which is a clear, unconditional and directly provided by a third party guarantee may be considered an exposure to the third party who provided the guarantee, rather than risk a deal with this customer, if all the following apply: 13.1. Security is recognized as a suitable credit risk mitigation in accordance with the provisions of annex 3 of the MKP.
13.2. where exposures and the guarantee is denominated in different currencies, for ensuring the exposure considered to be the value of the invoice in accordance with the provisions of the MKP 3. the conditions laid down in that annex for currency mismatch for unfunded credit protection;
13.3. the exposure and the maturity of the guarantee in the event of discrepancy, the provisions of annex 3 of the MKP provided the exposure values calculated order term mismatch;
13.4. If exposures to customers is partially secured by a third party guarantee, this part of the provided may ensure the exposure according to the provisions of the MKP 3. the conditions laid down in that annex.
14. Exposure restrictions do not apply to the following exposures: 14.1 active positions against claims against the central Governments or central banks, Member States ' regional governments or local governments if the unsecured exposures to such central Governments, central banks of the Member States, regional and local governments in accordance with the provisions of the credit risk of the MKP capital requirements standardised approach to calculate a 0 percent risk;
14.2. the items in the active list of reported claims against international development banks and international organisations, where unsecured exposures to such international development banks and international organisations in accordance with the provisions of the credit risk of the MKP capital requirements standardised approach to calculate a 0 percent risk;
14.3. asset items against requirements that are clear, unconditionally and directly by the Central Government, central bank, international organizations or the international development banks, regional and local government guarantees if unsecured exposures to such central Governments, central banks of the Member States, regional and local governments, international organizations or the international development banks in accordance with the provisions of the credit risk of the MKP capital requirements standardised approach to calculate a 0 percent risk;

14.4. other exposures to central Governments, central banks, international organisations or international development banks, Member States, regional and local governments, where unsecured exposures to such central Governments, central banks of the Member States, regional and local governments, international organizations or the international development banks in accordance with the provisions of the credit risk of the MKP capital requirements standardised approach to calculate a 0 percent risk, or risk exposures following the Central Government , central banks, international organizations or the international development bank guarantee;
14.5. asset items indicated exposures to central Governments or central banks which do not comply with the provisions of paragraph 14.1., but are denominated and funded in the national currency of the country concerned;
9.1. exposures to institutions with a residual maturity of up to one year, provided that such exposures do not constitute such institutions ' own funds;
14.7.80 percent of exposures to the rules of the Member States and the MKP referred to in annex 5, the national authorities with a remaining term of more than one year but not exceeding three years, provided that such exposures do not constitute such institutions ' own funds;
14.8. the covered bonds (covered bonds) corresponding to the provisions of annex 2 of the MKP-1 paragraph 12 of part requirements (100-RP) percent from the value of the bonds is RP in accordance with in point 12.4. applicable risk covered bonds;
9.3. subject to authorisation by the Commission, exposures to institutions subsidiary to its parent company or subsidiaries of the parent companies, if an institution is subject to consolidated supervision by the Commission or another Member State, the supervisory organ or of the supervisory organ of the foreign State in a foreign country where consolidated supervision in accordance with requirements equivalent to those laid down in the European Union Directive 2006/48/EC and 2006/49/EC;
14.10. investment in an insurance company or a reinsurance company's share capital or subordinated capital, if they do not exceed 40 percent of the institution's own funds;
14.11. the credits that are fully backed by the land registry registered in real estate mortgage, if the borrower and the mortgage is one and the same individual who inhabit this real estate, occupy or rent, and they comply with the provisions of annex 2 of MKP-1 in paragraph 9.3 of part requirements, as well as financial leasing transactions, if the authority retains the property rights to real estate, which the lessee will inhabit, occupy or rent While the lessee is not redeemed the property, make up 50 percent of the real market value of the property as determined by a licensed or certified real estate appraiser or valuer at least once a year;
14.12.50 percent of their off-balance-sheet items included in the value of the exposures referred to in rule 90.3. MKP;
14.13. off-balance sheet items included exposures with a 0% interest rate (see correction. MKP rule 90.4), if the contract between the authority and the respective client or group of connected clients requires that it be fulfilled only if its result will not be exceeded exposure limits;
14.14.80 percent of exposures to Member States ' regional governments or local governments or exposures that provided by the Member States, regional or local government guarantees or securities, value, when such exposures in accordance with the provisions of annex 2 of the MKP-1. parts of the requirements apply to the 20 percent level of risk;
14.15. exposures secured by the Central Government, international organizations, international development banks, regional and local government securities, which, in accordance with the requirements of the provisions of the MKP capital requirement calculation of credit risk standardised approach applies 0 interest risk;
14.16. exposures secured by a bank, its parent or subsidiary of the credit institution, a credit institution for a certain period or term deposits located in the said certificate of deposit issued by credit institutions, or other similar financial instruments, essentially, the relevant authorities in possession of the real. The remaining term of such deposit shall be equal to the remaining term or longer than that;
14.17. exposures secured by securities, other than those referred to in paragraph 14.15, but meets the following conditions: 14.17.1. securities are admitted on a regulated market, which allows the lens to determine the market value of the securities;
14.17.2. the market value of the securities exceeds the value of the exposure, i.e. the collateral value is at least 150 percent of the 14.17.2.1. exposure value, if security is institutional, regional and local government debt securities issued, other than those in paragraph 14.16, 14.17.2.2.250 percent of exposure values, if security is shares, 14.17.2.3.200 percent of the value of the exposure in the case of other securities;
14.17.3. the following exposures shall not exceed that of the securities shall be deposited as collateral, the remainder of the term;
14.17.4. securities do not constitute the institution's own funds.
15. the Authority applied to paragraph 14.17 14.15 exemptions only where the financial collateral is recognised as an appropriate credit risk mitigation in accordance to the provisions of annex 3 MKP.
16. paragraph 14 of these rules for the purpose of the guarantee also means in accordance with the provisions of title II of the MKP 2 part 4 of Chapter 3 and annex on appropriate recognized credit derivatives, except with the credit risk linked securities (credit linked notes).
17. The Authority's exposure limit takes into account for the determination of coverage, or the issuer of the security is analysed in relation to the possible donor concentration risk and, if necessary, take measures to reduce concentration risk.
18. Not allowed-14.15 14.17. the security referred to in paragraph 1, only the systematic use of exposure exceeding the exposure limits to achieve.
19. Exposure limit performance calculated as customer (customer related groups) or with the authority of persons to the total exposure to the first level and second level of equity capital, reduced by the provisions of the MKP 343.7. positive results referred to in paragraph 1, the total amount, less in accordance with the provisions of 348.1-MKP 348.5.   the conditions of point calculated the reduction in equity.
20. The authority and respect for position risk, settlement and counterparty risk capital requirements, the Commission may permit the exposure limit in the calculation of one customer (customer related groups) or with the authority of persons total exposures attributed to specified in point 19 equity, which added to the third level of the used capital.
21. The authority and respect for position risk, settlement and counterparty risk, the capital requirements may receive authorization from the Commission, exceed the exposure limits the risk of trading portfolio transactions, if the following conditions are met: 21.1. the customer (customer related groups) trading book exposure, relative to the total amount in accordance with paragraph 19 of the calculated capital does not exceed the exposure limits, but only of the excess trading book exposures included;
21.2. the authorities in accordance with paragraph 20 of the same specified capital amount is sufficient to cover also in accordance with paragraph 23 of the additional capital requirement calculated exposure limit exceedances;
21.3. If from the moment a customer over the excess (of related client groups) exposure limits, the last 10 days, following the customer (customer related groups) trading-book exposures total not exceeding 500 percent of the institutions, in accordance with paragraph 20 of certain own funds;
21.4. the entire surplus, which persisted for more than 10 days, the total does not exceed 600% of the institutions, in accordance with paragraph 20 of certain own funds;
21.5. the authority shall submit to the Commission every three months a report of all exposure limit excess, including a customer or customer group of related clients, personally identifiable information and excess.
22. The excess referred to in paragraph 21, the amount is calculated as the customer (customer related group) marketing and trade portfolio exposure totals over 25 percent of the excess in accordance with paragraph 20 of the specific amount of equity.
23. The excess capital requirement shall be calculated as follows:

23.1. choose customer (customer related groups) the trading-book exposures, starting with those which the higher rate of weighing the specific risk capital requirement, or the highest level of risk, the counterparty settlement risk or capital requirements, in accordance with the relevant provisions of title II of the MKP 3.  sections 1, 2 and 3. Select the exposures that weighing risk rates or lower degrees of order until the total is equal to the amount of the excess determined in accordance with the requirements of paragraph 22;
23.2. If the surplus does not exist for more than 10 days, the additional capital requirement for selected exposures calculated as 200 percent of the business of such risk capital requirements for specific risk, or counterparty and settlement risk in total;
14.5. If you overshoot there for more than 10 days, the additional capital requirement for selected exposures calculated as following exposure to the specific risk capital requirements or counterparty and settlement risk multiplied by the coefficient shown in table. The excess of total exposures for use exposure rates applicable to weighing or risk staging a promotion order.
Table. Exposure limit excess capital to be used in the calculation of the coefficients in the excess amount in comparison to the equity ratio to 40% 200% From 40% to 60% 300% from 60% to 80% 400% From 80% to 100% 100% to 500% of the 250% 600% over 250% 900% 24. Authority, determining the duration of exceedance must not take into account the exposures that result in exceedances of the limit positions for the time being transferred to another company , or other artificial transactions with the company, the exposures that exceed the exposure limit, if such transactions are carried out only with the intention of reducing the limit positions of the excess duration.
III. the Commission authorisation procedures 25. for 14. paragraph 9 of the Commission referred to in the authorization does not limit exposures to institutions of the subsidiary, the parent company or a subsidiary of the parent, if the institution is subject to consolidated supervision, the authority shall submit to the Commission a written application, accompanied by the last approved annual or interim balance, profit and loss statement and the exposure control policies or procedures governing the exposure limits and their control in these societies and the consolidation within the group.
26. for the Commission, referred to in paragraph 21 of the permission limit excess exposure to trading book exposures, the authority shall submit to the Commission an application accompanied by the following documents: 26.1. limit excess and their compliance with the objectives of the Authority's strategy;
26.2. the excess exposures and the associated market risk management procedures and policies, as well as the position of monitoring the duration of procedures;
16.3. a description of the information system that allows you to calculate additional capital requirements and to identify excess and register referred to in paragraph 24 exposures;
26.4. the overrun of the financial instruments making up the description and characterisation of the counterparty's exposure limit structure;
26.5. other additional information which the Authority considers appropriate to the Commission.
IV. Reporting procedures 27. the authority shall prepare the following reports: 27.1. "large exposures review" (UPDK 0651287 form; Annex 1);
27.2. "report on exposures to persons working with the institution" (UPDK 0651288 form; Annex 2);
27.3. "exposure limits are not subject to the large exposures review" (UPDK 0651289 form; Annex 3).
28. The authority and respect the position of settlement risk and counterparty risk capital requirements and has received permission to exceed exposure limits, subject to the requirements of paragraph 21, in addition to preparing the following reports: 28.1. "report on the additional capital requirement of exposure limit excess" (UPDK 0651290 form; Annex 4);
28.2. "report on the exposure limit, the excess cases in the reporting period" (UPDK 0651291 form; Annex 5).
29. Exposure restriction enforcement reports numbers shown in whole 1000s of pounds or as percentage with two decimal places.
30.27.1., 27.3., 28.1 and 28.2.. the reports referred to in point client (client group related client) number is comprised of the following: 30.1.-the customer number of the customer (without a period) on the relevant report;
30.2. the interrelated group of clients – for the customer each connected client groups gives the customer the same sequence number (without a period) during the report that matches the serial number of the review group;
30.3. the Authority's parent company, subsidiaries, its other subsidiaries of the parent company granted the number "99".
31. An exposure reports for each client displays following information: 31.1. for legal entities – the full name of a registered company, registration code according to international standard ISO 3166 ' and the name of the national area code: part 1: country codes "and the registration number of the relevant register (residents in the Republic of Latvia, non-residents – in the country concerned);
31.2. the natural person – given name, surname, place the code according to the standard ISO between folksy 3166 ' and the name of the national area code: part 1: country codes "and the personal code or similar code that allows to identify unequivocally the person concerned.
32. when preparing the report referred to in paragraph 27, the trading book and the exposures of the trading book exposures, where the authority has received permission to exclude the position risk, settlement and counterparty credit risk capital requirements for the trading book exposures, show, broken down by the following groups: 32.1. credit – loans, debit balances on current accounts (overdraft), financial leasing, factoring, credit institution, other than a credit institution, the reporting of deposits and other deployed essentially similar transactions;
32.2. investments, debt securities, participation in the share capital of the company and in the capital, subordinated liabilities that create customer securities transaction through the deployment of the (underwriting) and other transactions with customer securities;
32.3. guarantees and other contingent liabilities, a guarantee of good customers, the authority issued by the third party for the client's benefit, as well as other obligations of the customer, if the customer has the right to require the undertakings;
32.4. other exposures – requirements arising from regulated market traded derivatives, reserve contributions in the stock market and other current or future claims against the customer.
33. "large exposures review" prepared, subject to the following requirements: 33.1. the report included large exposures, i.e. the exposures to the client (mutual group of connected clients), which exceeds 10 percent of the equity, pursuant to paragraph 13-16;
33.2. If exposures or part thereof is not included in the customer's large exposures total, based on the provisions of paragraph 13, the following exposures or parts, which are covered by the guarantee, produced the column "the Transferred exposures" and included with the client, who has provided a guarantee, the total of the exposures;
33.3. each customer (customer related groups) exposures subject to total equity, established pursuant to paragraph 19 of the conditions, or if the Commission has agreed to the third level of the capital use conditions of-20.
34. "report on exposures to persons working with the institution" shall be subject to the following requirements: 34.1. the report shall include all authorities exposures to persons associated with the institution, except for exposures to institutions or subsidiaries of the parent company, or its parent company and the subsidiary companies, institutions in share capital of the company participation, in which the institution's membership, pursuant to paragraph 13-16;
21.3. If exposures or its part is not included with connected persons in total exposure, on the basis of the provisions of paragraph 13, the following exposures or parts, which are covered by other client security displays the column "the Transferred exposures" and included with the client, who has provided a guarantee, the total of the exposures;
21.3. guarantees that persons associated with the institution issuing the other person who used them in dealings with the authorities, presented as indirect;
21.4. every person associated with the Authority's exposure totals and all the exposure of such persons apply to the total amount of own funds laid down pursuant to paragraph 21 of the conditions, or if the Commission has agreed to the third level of the capital use,-22.
35. "exposure limits are not subject to the large exposures review" includes 14.5-14.15.14.19. as referred to in paragraph 1 and the exposures to a single client (interrelated group of customers), which is excluded from the limitation of the exposure totals.

36. "the statement to the additional capital requirement of exposure limit excess" shall include each customer (customer related groups) the capital requirement calculated for exceedance. All of the customer (customer related groups) the excess capital requirements total included provisions of title II of the MKP 1.  Part 2 of chapter in the required minimum amount of own funds in the calculation.
37. "the report on exposure limit exceedance cases in the reporting period" includes all of the customer or customer group related to the overrun of the exposure limits, which allow the reporting period (quarter). A single customer or a group of related customer group can have more than one overrun during the reporting period, and each of them shall be entered in a separate row of the report. Thus, a single customer (customer related group) can have more than one report line is filled in.
V. reporting procedures 38. "large exposures review", "review of exposures to persons working with the institution", "exposure limits are not subject to the large exposures review", "statement to the additional capital requirement of exposure limit excess" and "report on the exposure limit, the excess cases during the reporting period the authority prepares a quarterly report on the State of the last month of the last date and submitted to the Commission by a quarter following the 15th of the month.
39. in paragraph 38 of the rules, these accounts shall be drawn up for submission to the Commission of 16 July 2004, regulations No 156 "electronically submit statistical reports preparation and dispatch rules".
40. If the Commission finds that the report has been prepared in error, it will be announced in the report to the applicant. If the Commission has not indicated otherwise, corrected report shall be submitted not later than the working day following notification of the existence of the error from the Commission.
Informative reference to European Union directives, the regulations include provisions resulting from: 1) of the European Parliament and of the Council of 14 June 2006 on the directive 2006/48/EC relating to the taking up and pursuit of the business of credit institutions (recast);
2) of the European Parliament and of the Council of 14 June 2006, Directive 2006/49/EC on the capital adequacy of investment firms and credit institutions.
Financial and capital market Commission President When the U.