# Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012 (Text with EEA relevance), Article 379: Free deliveries

Extent: E+W+S+N.I.

1. An institution shall be required to hold own funds, as set out in Table 2, where the following occurs:
(a)it has paid for securities, foreign currencies or commodities before receiving them or it has delivered securities, foreign currencies or commodities before receiving payment for them;
(b)in the case of cross-border transactions, one day or more has elapsed since it made that payment or delivery.
Table 2
Capital treatment for free deliveries
Column 1
Column 2
Column 3
Column 4
Transaction Type
Up to first contractual payment or delivery leg
From first contractual payment or delivery leg up to four days after second contractual payment or delivery leg
From 5 business days post second contractual payment or delivery leg until extinction of the transaction
Free delivery
No capital charge
Treat as an exposure
Treat as an exposure risk weighted at 1 250 %
2. In applying a risk weight to free delivery exposures treated according to Column 3 of Table 2, an institution using the Internal Ratings Based approach set out in Part Three, Title II, Chapter 3 may assign PDs to counterparties, for which it has no other non-trading book exposure, on the basis of the counterparty's external rating. Institutions using own estimates of ‘ LGDs ’ may apply the LGD set out in Article 161(1) to free delivery exposures treated according to Column 3 of Table 2 provided that they apply it to all such exposures. Alternatively, an institution using the Internal Ratings Based approach set out in Part Three, Title II, Chapter 3 may apply the risk weights of the Standardised Approach, as set out in Part Three, Title II, Chapter 2 of this Regulation and Articles 132a to 132c of Chapter 3 of the Standardised Approach and Internal Ratings Based Approach to Credit Risk (CRR) Part of the PRA Rulebook provided that it applies them to all such exposures or may apply a 100 % risk weight to all such exposures.
If the amount of positive exposure resulting from free delivery transactions is not material, institutions may apply a risk weight of 100 % to these exposures, except where a risk weight of 1 250 % in accordance with Column 4 of Table 2 in paragraph 1 is required.
3. As an alternative to applying a risk weight of 1 250 % to free delivery exposures according to Column 4 of Table 2 in paragraph 1, institutions may deduct the value transferred plus the current positive exposure of those exposures from Common Equity Tier 1 items in accordance with point (k) of Article 36(1).

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Source: https://www.legislation.gov.uk/eur/2013/575/article/379 (the official version)
Page: https://openlegislation.uk/eu-regulation-2013-575/article-379
Contains public sector information licensed under the Open Government Licence v3.0. Source: legislation.gov.uk, The National Archives.