See a non-exhaustive list of the type of information that firms should supply as part of their large exposure institutional waiver applications.
You should supply:
- a clear description of your business model, including a full explanation of why you need to extend exposures in excess of your entire capital base
- details of internal governance controlling large exposures including what processes are in place to monitor exposures on an ongoing basis
- details of whether the waiver is sought on a consolidated or solo basis
- the preferred length of the waiver and details of any plans the firm has to work towards compliance over the course of the waiver term
Counterparties and limits
- a clear list of the current (board approved) exposure limits and the proposed exposure limits for each counterparty / group of counterparties for which the waiver is intended to apply
- an explanation of the occasions where the firm believes it would need to utilise the requested waiver limits, preferably giving examples
- a statement of the range and type of counterparties you would need to use to comply fully with a 100% limit. Please evidence the research that has been conducted in determining this list
- an explanation of why it would be unduly burdensome for you to use these counterparties, and therefore why you require a waiver. This may include:
- the extent that diversification may increase
- the probability of your failure as result of default from one of the additional counterparties
- the direct compliance costs involved in counterparty diversification and an estimation of the impact this would have on solvency / profitability
- a full explanation of why you are not able to find further counterparties to diversify your exposures to, and the reasons why this is the case – including where they are unwilling to transact with you
Liabilities and creditors
- a sufficiently detailed explanation of your liabilities, describing those persons that could potentially suffer detriment if you experienced a default to a single counterparty to which you have exposures exceeding your entire capital base
- describe the seniority of creditors on a gone-concern basis, to allow us to determine who is most likely to take losses in the event of default
- outline how you will seek to communicate to creditors the risk they face in the event that a single major counterparty of yours does default
Further information
- a description of what steps would be necessary to restructure your business model to comply with the unmodified rules, the costs involved in doing so, and why you believe this creates an undue burden