Prudential Regulation Authority Rulebook

1.

The following exposures shall be exempted from the application of Article 395(1):

1. (a) asset items constituting claims on central governments, central banks or public sector entities which, unsecured, would be assigned a 0% risk weight under Part Three, Title II, Chapter 2;
2. (b) asset items constituting claims on international organisations or multilateral development banks which, unsecured, would be assigned a 0% risk weight under Part Three, Title II, Chapter 2;
3. (c) asset items constituting claims carrying the explicit guarantees of central governments, central banks, international organisations, multilateral development banks or public sector entities, where unsecured claims on the entity providing the guarantee would be assigned a 0% risk weight under Part Three, Title II, Chapter 2;
4. (d) other exposures attributable to, or guaranteed by, central governments, central banks, international organisations, multilateral development banks or public sector entities, where unsecured claims on the entity to which the exposure is attributable or by which it is guaranteed would be assigned a 0% risk weight under Part Three, Title II, Chapter 2;
5. (e) asset items constituting claims on regional governments or local authorities of the United Kingdom where those claims would be assigned a 0% risk weight under Part Three, Title II, Chapter 2 and other exposures to or guaranteed by those regional governments or local authorities, claims on which would be assigned a 0% risk weight under Part Three, Title II, Chapter 2;
6. (f) exposures to counterparties referred to in Article 113(6) or (7) if they would be assigned a 0% risk weight under Part Three, Title II, Chapter 2. Exposures that do not meet those criteria, whether or not exempted from Article 395(1) shall be treated as exposures to a third party;
7. (g) asset items and other exposures secured by collateral in the form of cash deposits placed with the lending institution or with an institution which is the parent undertaking or a subsidiary of the lending institution;
8. (h) asset items and other exposures secured by collateral in the form of certificates of deposit issued by the lending institution or by an institution which is the parent undertaking or a subsidiary of the lending institution and lodged with either of them;
9. (i) exposures arising from undrawn credit facilities that are classified as low-risk off-balance sheet items in Annex I of the CRR and provided that an agreement has been concluded with the client or group of connected clients under which the facility may be drawn only if it has been ascertained that it will not cause the limit applicable under Article 395(1) to be exceeded;
10. (j) clearing members' trade exposures and default fund contributions to qualified central counterparties;
11. (k) exposures to the UK deposit guarantee scheme arising from the funding of that scheme;
12. (l) clients' trade exposures referred to in Article 305(2) or (3).

Cash received under a credit linked note issued by the institution and loans and deposits of a counterparty to or with the institution which are subject to an on-balance sheet netting agreement recognised under Part Three, Title II, Chapter 4 shall be deemed to fall under point (g).

2.

The competent authority may permit an institution to treat as fully or partially exempt from the application of Article 395(1) the following types of exposures:

1. (a) [Note: Provision left blank];
2. (b) [Note: Provision left blank];
3. (c) exposures incurred by an institution, including through participations or other kinds of holdings, to its parent undertaking, to other subsidiaries of that parent undertaking, or to its own subsidiaries and qualifying holdings, in so far as those undertakings are covered by the supervision on a consolidated basis to which the institution itself is subject, in accordance with the CRR, United Kingdom enactments and rules which implemented Directive 2002/87/EC or with equivalent standards in force in a third country; exposures that do not meet those criteria, whether or not exempted from Article 395(1), shall be treated as exposures to a third party;
4. [Note: "NCLEG trading book permissions" and "NCLEG non-trading book permissions" (as defined in rule 1.2 of the Large Exposures Part) are granted by the PRA under this subparagraph]
5. (d) [Note: Provision left blank];
6. (e) [Note: Provision left blank];
7. (f) [Note: Provision left blank];
8. (g) asset items constituting claims on central banks in the form of required minimum reserves held at those central banks which are denominated in their national currencies;
9. [Note: "Sovereign large exposures permissions" (as defined in rule 1.2 of the Large Exposures Part) are granted by the PRA under subparagraph (g)]
10. (h) asset items constituting claims on central governments in the form of statutory liquidity requirements held in government securities which are denominated and funded in their national currencies provided that the credit assessment of those central governments assigned by a nominated ECAI is investment grade;
11. [Note: "Sovereign large exposures permissions" (as defined in rule 1.2 of the Large Exposures Part) are granted by the PRA under subparagraph (h)]
12. (i) [Note: Provision left blank];
13. (j) [Note: Provision left blank];
14. (k) [Note: Provision left blank].

[Note: This is a permission under section 144G and 192XC of FSMA to which Part 8 of the Capital Requirements Regulations applies]

3.

[Note: Provision left blank].

4.

The simultaneous application of more than one exemption set out in paragraphs 1 and 2 to the same exposure shall not be permitted.

[Note: This rule corresponds to Article 400 of the CRR as it applied immediately before revocation by the Treasury.]