Regulations on credit institutions and investment firms' large exposures


Date FOR-2006-12-22-1615


Affairs Ministry


Published in 2007 Booklet 1


Commencement 01.01.2007

Edited

FOR-2014-08-22-1105 from 30/09/2014

Changes
FOR 1997-04-23-376

For
Norway

Legal

LOV-1988-06-10-40-§2-10, LOV-2007-06-29-75-§9-15 cf. LOV-2015-04-10-17-§23-2

Promulgated
04.01.2007

Short Title
Regulation on large exposures

Chapter Overview:

Chapter 1. General provisions (§§ 1-7)
Chapter 2. Rules for calculating exposures in the trading portfolio (§§ 8-12)
Chapter 3. Reporting requirements (§13)
Chapter 4. Commencement and transitional arrangements (§§ 14-15)

Adopted by the Ministry of Finance of 22 December 2006 pursuant to Act 10 June 1988 no. 40 Financial Institutions and Financial Institutions (Financial Institutions Act) § 2-10 second paragraph and the Act of 19 June 1997. 79 Securities § 8- 11, second paragraph.
Added authority: Act 29 June 2007 no. 75 Securities § 9-15.
EEA information: EEA Agreement Annex IX. 14 (Directive 2000/12 / EC, Directive 2006/48 / EC) and no. 31 (Directive 93/6 / EEC, Directive 2006/49 / EC).
Changes: Amended by regulations 3 May 2007 no. 468, June 29, 2007 no. 876, 18 Dec 2009 No.. 1726, 20 Dec 2010 No.. 1714, 24 January 2011 No.. 69, 20 Dec 2011 No.. 1415, August 22, 2014 No.. 1105.

Chapter 1. General Provisions

§ 1. Scope These regulations apply to banks and financial institutions, holding companies in financial, investment firms authorized to operate under the Securities Trading Act § 9-1, cf. Securities Trading Act § 2-1, first paragraph. 2, 3, 6 and 7, and parent company as mentioned in the securities Trading Act § 9-21 first paragraph. 3.

§ 2. Definitions In this Regulation:
Primary capital: Primary capital calculated in accordance with Regulation 1 June 1990 no. 435 on the calculation of regulatory capital for financial institutions, clearing houses and securities firms Part B. The additional capital that can be included maximum equivalent to one third of the core capital.
Institution: firms mentioned in § 1
IRB approach: With IRB method means the IRB approach to calculating credit under the provisions of the Capital Adequacy Regulations Part III.
Capital Requirements Regulations 14 December 2006 No.. 1506 on capital requirements for commercial banks, savings banks and financial institutions, holding companies in financial, securities and fund management companies, etc. (Capital Adequacy Regulations).
Total commitments: As overall commitment considered the sum of all assets items and off balance sheet items, ie exposures, exposures and positions and off-balance as the institution with a single counterparty. The commitments, exposure and positions risk weighted according to the provisions of § 6
Standard method: With the standard method means the rules for the risk weighting of exposures in the Capital Adequacy Regulations Part II.
Huge commitment, total commitment amounts to 10 percent or more of its own funds.
Supplementary regulatory capital: Primary capital minus capital requirements arising from the provisions of the Capital Adequacy Regulations, Part III, V and VII.

§ 3. Counterparty limits for the highest overall exposure to a single counterparty also apply for loans with two or more counterparts when controlling influence or economic relations between these is such that economic difficulties in the one likely to result in payment difficulties for the person or the other .
FSA decides in cases of doubt whether two or more persons or undertakings to be considered as one counterparty.

§ 4. The total commitment When calculating total commitment the commitment valued at book value after deductions for individual write, but without taking into account any write-downs on the group of loans that commitment belongs. IRB method can not be used.
By involvement into units or tranches, such as mutual fund units and securitisations shall calculating total commitment include the underlying exposures. The institution shall make an assessment of the economic substance and risks inherent in the transaction structure.
Total commitment does not include:

A)

Exposures arising in connection with the settlement of foreign currency transactions and purchases and sales of securities is normally defined not as a part of an institution's commitments, with the exception of situations where there is a delay or significant time difference in the settlement. Currency Transactions in which settlement occurs later than 48 hours after the agreed settlement date shall nonetheless be included in an institution's exposures. The same applies to the purchase or sale of securities where settlement is not effected within 5 working days after the agreed settlement date.

B)
exposures that are deducted from own funds in accordance with the Regulation on 1 June 1990 no. 435 on the calculation of regulatory capital for financial institutions, clearing houses and securities firms capital § 17 first paragraph a to n, others paragraph and the third paragraph.

C)
exposure arising as a result of late incoming payments related to customer activity and other commitments in connection with payment or by clearing, settlement and disposal of financial instruments for the account of customers, and settled before expiry of the subsequent working day.

D)
Exposure to institutions offering payment services, and settled by the end of the same business day.

E)
exposure to the issuer of the security, including exposure to residual value guarantor. Institutions should establish a framework and procedures for controlling and managing risks resulting from exposure to the issuer of the security, including exposure to residual value guarantor. Has the institution second exposure to the issuer of the security shall be considered in connection with the issue of security. If the internally prescribed limits are exceeded, the institution shall notify the Financial Supervisory Authority, and reduce their exposure or increasing their capital base.

F)
commitments institutions settled within the following business day, provided that the loan is denominated in NOK, DKK or SEK, and are not included in the opponent's capital.

§ 5. Maximum limit for total commitment An institution can not have a higher facility than at any time is justifiable. Total engagement must not exceed an amount equivalent to 25 percent of the institution's capital.
Finanstilsynet may in special cases impose stricter requirements than those laid down in the first paragraph.
When the counterparty is another institution, an institution not have a total commitment that exceeds the greater of an amount equal to EUR 150 million or an amount equivalent to 25 percent of the institution's capital. When 150 million euro implies a higher limit than 25 percent of its own funds, the institution's overall engagement with the institution does not exceed 100 percent of the institution's capital.
Institution shall at all times comply with the prescribed upper limits. If exposures exceed the upper limits, notification thereof shall be sent immediately to the institution's Audit Committee and the Financial Supervisory Authority. FSA may set a deadline for the institution to adapt to the limits, and may impose a deduction from the capital base.

§ 6. Risk weighting of exposures for the purposes of the limits in § 5 may commitments not risk weighted 100 percent, the following risk weights:

1.
Commitments risk weight of 0 percent:

A)
commitments and commitments guaranteed or other types of claims on states, central banks, public corporations, international organizations or multilateral development banks where unsecured claims on these debtors offer 0 percent risk weight under the Standardised Approach. It can not be given to state guarantees for loans with institutions if the guarantee is provided as a result of temporary emergency measures.

B)
Commitments secured by mortgage securities issued or guaranteed by governments, central banks, public corporations, international organizations or multilateral development banks where unsecured claims on these debtors offer 0 percent risk weight under the Standardised Approach. It can not be given to state guarantees for loans secured by securities issued by institutions if the guarantee is provided as a result of temporary emergency measures.

C)
commitments or claims on governments or central banks denominated in the debtor's currency and financed by borrowings in the same currency.

D)
commitments secured by the institution's own deposits received or equivalent instruments. The same applies to loans secured by deposits received by the parent company or subsidiary of the institution.

E)
commitments subsidiaries and loans guaranteed by the subsidiary, if the parent company and subsidiaries are subject to supervision on a consolidated basis.

F)

Unused credit facilities categorized under the Capital Adequacy Regulations § 6-1 tenth paragraph, unless there is an agreement with the counterparty to the credit facility can only be used if it is ascertained that it will not result in limits in § 5 first and third paragraphs are exceeded.

G)
Trade commitments recognized clearing houses and units in recognized clearing houses default fund.

2.
Commitments risk weight 10 percent:

A)
Commitments in the form of bonds. The same applies to bonds issued by foreign credit institutions and meeting the requirements of Directive 2006/48 / EC Annex VI part 1 no. 12 point 68 to 70, and the requirements set by the authorities of that State.

3.
Commitments risk weight 20 percent:

A)
commitments or guaranteed by financial institutions in the same group, if the companies are subject to supervision on a consolidated basis. This does not commitments as stated in the first paragraph. 1 letter e.

B)
commitments and exposures guaranteed by Norwegian municipalities. Commitments with and guaranteed by regional and local authorities in other Member States may be given the same risk weight as the risk weighting national governments allow for such commitments.

Off-balance sheet after the Capital Adequacy Regulations section 6, shall be multiplied by a conversion factor of 100 percent and risk weighted according to these regulations. For derivatives, etc. apply counterparty risk provisions in the Capital Adequacy Regulations Part V and VII.
FSA may authorize the parent company provides loans or guarantees for other group companies beyond the limitations in § 5.
Collateral must meet the requirements of the Capital Adequacy Regulations Part IV to be taken into account in this section.

§ 7. Recognition of assurance engagement In applying the limits in § 5 the following applies for financial collateral:

A)
Institutions may calculate the effect of collateral under the Capital Adequacy Regulations § 18-3 and utilizing adjusted commitment amount (E *) when determining the total commitment.

B)
Institutions that are authorized to use the advanced IRB approach, which calculates the effects of financial collateral separately from other factors in the LGD estimates may Finanstilsynets permit pay attention to these effects in the calculation of total commitment .

C)
Institutions that are authorized to use the advanced IRB approach, and who do not use the method in point b, can estimate the effects of financial collateral under subparagraph a or by the method in the fourth paragraph b.

Institutions that stipulates overall commitment under the first paragraph shall make regular stress tests to measure the concentration of credit risk and volatility in the value of collateral. If the stress tests show that the value of the securities are overvalued, the value of the securities reduced accordingly.
Pant residential property can be recognized by up to 50 percent of the commitment amount. The collateral must meet the requirements of the Capital Adequacy Regulations § 5-9, except for the second paragraph a and b.
For loans guaranteed or secured by collateral issued by a third party, with equal or lower risk weight than its original counterpart after the Capital Adequacy Regulations part II the institution may be regarded

A)
the guaranteed portion of the loan as a commitment by the guarantor and

B)
market value of the securitized part of the commitment as a commitment with the issuer of the security, provided that there is no maturity differences between the loan and security.

For the purposes of the fourth paragraph a, the following applies:

A)
If commitment and guarantee is denominated in different currencies, it shall involvement amounts to be considered under warranty are calculated according to the Capital Adequacy Regulations § 18-6 second and third paragraphs.

B)
Period Difference between commitment and guarantee to be treated in accordance with the Capital Adequacy Regulations Chapter 19.

C)
Partial coverage may be recognized in accordance with the Capital Adequacy Regulations § 18-7.

Method in the fourth paragraph b may only be used in combination with the method in the first paragraph a of loans covered by the Capital Adequacy Regulations § 3-3 second paragraph and the Capital Adequacy Regulations § 3-4.

Chapter 2. Rules for calculating exposures in the trading portfolio

§ 8. Scope The provisions of this chapter apply to institutions to calculate the capital requirements to cover position risk and settlement and counterparty risk under the provisions of market risk in the capital Regulations Part VII and counterparty risk under the provisions of counterparty risk in capital Regulations Part V.


§ 9. Calculation of exposures in the trading portfolio commitments individual counterparties relating to the trading portfolio is calculated by summing the following components:

A)
difference between the institution's long and short positions in financial instruments issued by the relevant counterparty, if positive,

B)
net positions in share, reduced by the factors described in the Capital Adequacy Regulations, Part VII, Chapter 36 § 36-1.

C)
commitments related to unsettled transactions in accordance with the Capital Adequacy Regulations Part VII Chapter 37.

The sum of all loans in the trading portfolio should be added together with the other commitments with the same counterparty.
Internal measurement methods for calculating the commitment in accordance with the Capital Requirements Directive Part III can not be used.
It can not be calculated lower risk weight resulting from that there is security for loans in the trading portfolio. The following commitments are exempt:

A)
Repurchase agreements and reverse repurchase agreements.

B)
Activating or borrow securities or commodities.

Counterparty risk exposures in the trading portfolio may be risk weighted in accordance with the provisions of § 6

§ 10. Exceeding difference between the sum of all exposures to the same counterparty, cf. § 9, second paragraph, and limits in § 5 first paragraph or § 5 third paragraph is considered excess by this regulation.
Institution may exceed the limits in § 5 if the overrun solely due to commitments that are related to the trading portfolio. Exceeding the institution must meet requirements for supplementary capital requirements calculated in accordance with § 11. The sum of trading portfolio exposures to a single counterparty may not exceed 500 percent of the institution's capital.
All overruns that have occurred over the past three months and resulting exposures that relate to the trading portfolio, shall every three months reported to the Financial Supervisory Authority. For every case where there is such excess shall overruns scope and the name of the individual customer reported.

§ 11. Calculation of supplementary regulatory capital if exceeded Exceeding referred to in § 10 shall be assigned to exposures in the trading portfolio pursuant to the provisions of this section. Commitments are ranked according to the weights for specific position risk and settlement and counterparty risk, so that engagement with the highest weight counted first. Each engagement involved in the transgression is multiplied by the associated risk weight and a multiplier equal to 2. The sum of the weighted commitments constitute the basis of calculation. The supplementary capital shall be at least equal to 8 percent of this calculation.
If the exceedance has lasted for more than ten days, the calculation under subsection converted by replacing the multiplier with a multiplier that follows this table:

Exceeding percentage of regulatory capital
Multiplier

Up 40 percent
2

Between 40 and 60 percent
3

Between 60 and 80 percent
4

Between 80 and 100 percent
5

Between 100 and 250 percent
6

Over 250 percent
9

The commitments are ranked so that engagement with the highest risk weight multiplied by the largest multiplier.

§ 12. Limit exceeded summed over individual counterparties sum of overruns on individual counterparties in the trading portfolio that has lasted for more than ten days, shall not exceed 600 percent of the institution's capital.

Chapter 3. Reporting requirements

§ 13. Reporting institutions shall report the following information on all large exposures to the Financial Supervisory Authority, including large exposures as exempt from the total commitment under § 4 subsection or given a risk weight of 0 percent under § 6, first paragraph. 1, at least twice per year:

A)
Identification of the counterparties, including counterparties referred to in § 3, which the institution has a large engagements.

B)
commitment's value before taking into account the impact of security for commitment under § 7.

C)
Any type of funded or unfunded credit protection.

D)
commitment's value when taking into account the impact of security for commitment under § 7.

Institutions using the IRB approach for capital adequacy regulations Part III, in addition to the information mentioned in subsection disclose the 20 largest exposures on a consolidated basis, excluding the commitments that are excluded from total commitment under § 4 subsection or given a risk weight 0 percent under § 6, first paragraph. 1.

Institutions shall, to the extent possible, analyze their exposures to the issuers of collateral and providers of unfunded credit protection, as well as its underlying exposures referred to in § 4, second paragraph, to determine any risk concentrations. The institutions shall on the basis of the analysis determine whether it should be taken, and shall in any case inform the Financial Supervisory Authority on significant findings.
FSA may lay down detailed rules on reporting.

Chapter 4. Commencement and transitional arrangements

§ 14. Entry into force These regulations enter into force on 1 January 2007. From the same date, the Regulations on 23 April 1997 no. 376 on the supervision and control of credit institutions and investment firms' large exposures.

§ 15. (Repealed 30 September 2014 by regulation 22 August 2014 No.. 1105.)