Large Exposure Risk from Underwriting Securities: Calculating the Net Underwriting Exposure
Concentration Riskpurposes, the total amount of an Authorised Firm's Trading Book Exposuresto any Personmust include net Underwriting Exposureto that Person.
Authorised Firmmust include any other Exposuresarising out of underwriting (including any Counterparty Exposuresto any sub-underwriters) for the purposes of calculating the total amount of its Trading Book Exposuresto a Personfor Concentration Riskpurposes.
Authorised Firm, before entering into a new Underwritingcommitment, must be able to recalculate the Concentration Riskcapital component to the level of detail necessary to ensure that the firm's Capital ResourcesRequirement does not exceed the firm's Capital Resources.
PIB A5.8.14 PIB A5.8.14
Authorised Firmmust calculate the net Underwriting Exposureto an Issuerby applying the relevant reduction factors in the table below to its net Underwritingposition calculated under PIB Rule A5.8.6. Time Reduction factor to be applied to net underwriting position Initial commitment to working day 0 100% Working day 0 100% Working day 1 90% Working day 2 75% Working day 3 75% Working day 4 50% Working day 5 25% Working day 6 onwards 0%
PIB A5.8.14 Guidance
The effect of the
Ruleand the table above is that there is no concentration limit for net Underwriting Exposuresbetween initial commitment and the end of working day 0.