03 · Funds — the look-through ladder

The wrapper should not change the risk

A bank holding €100m of corporate bonds and a bank holding €100m of a fund that holds corporate bonds own the same risk; the CIU framework exists to make their capital match — and to price the cases where they cannot be matched because the fund will not say what it holds. Hence the ladder: look-through (LTA) where holdings are known, position by position; mandate-based (MBA) where only the rules are known — capitalised as if the fund runs to the riskiest limits its mandate permits; fall-back (FBA, 1250%) where nothing is known. Two multipliers keep the incentives honest: fund leverage scales the exposures before weighting, and relying on a third party's calculation instead of your own costs a ×1.2 factor. The design turns transparency into a priced commodity — the manager's monthly data file is worth basis points of capital, and asset managers learned to sell it accordingly.

• Sources: Art 132–132c CRR; EBA Q&As on mandate interpretation and leverage.
• The framework arrived with CRR2; CRR3 leaves it intact. Watch NBFI-monitoring pressure: supervisors increasingly ask what sits inside LTA files, not just whether they exist.