7.11.2014 Official Journal of the European Union L 324/1 II (Non-legislative acts) REGULATIONS COMMISSION DELEGATED REGULATION (EU) No 1187/2014 of 2 October 2014 supplementing Regulation (EU) No 575/2013 of the European Parliament and of the Council as regards regulatory technical standards for determining the overall exposure to a client or a group of connected clients in respect of transactions with underlying assets (Text with EEA relevance) THE EUROPEAN COMMISSION, Having regard to the Treaty on the Functioning of the European Union, Having regard to 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 ('), and in particular the third subparagraph of Article 390(8) thereof, Whereas: (1) In order to identify the overall exposure to a particular obligor that results from the institution’s exposures to a transaction with underlying assets, the exposure value should be firstly identified separately for each of these exposures. The total exposure value should then be determined by the aggregate of these exposures, but should not be larger than the exposure value of the exposure formed by the underlying asset itself. (2)  Where exposures of other investors rank pari passu with the institution’s exposure, the exposure value of the institution’s exposure to an underlying asset should reflect the pro-rata distribution of losses amongst the exposures that rank pari passu. This results from the fact that if a default event has occurred for an underlying asset, losses are always distributed amongst the exposures that rank pari passu according to the pro-rata ratio of each of these exposures and the maximum loss to be suffered by the institution in case of a total loss on an underlying asset is limited to the portion according to the ratio of the institution’s exposure to the total of all the exposures that rank pari passu. (3) A distinction should be made between transactions where all investors rank pari passu such as collective investment undertakings, and other transactions, such as securitisations, which can involve tranching where exposures can rank differently in seniority. For the former, the resulting exposure to an underlying asset is solely dependent on the pro-rata ratio of the investor’s exposure in relation to the exposures of all investors. For the latter, losses are attributed first to certain tranches depending on their seniority and then, in case of more than one investor into the same tranche, amongst the investors on a pro rata basis. All tranches in a securitisation should be treated equally as, in a worst case scenario, subordinated tranches may disappear very quickly. In particular, the maximum loss to be suffered by all investors in a certain tranche in case of a total loss on an underlying asset should be recognised since no mitigation should be recognised from subordinated tranches. The institution’s exposure to an underlying asset of a transaction should not exceed the total exposure value of this tranche (since the loss for an investor in a given tranche that stems from the default of an underlying asset can never be higher than the total exposure value of the tranche) and the exposure value of the exposure formed by the underlying asset (since the institution can never lose more than the amount of the underlying asset). This limitation of maximum loss should () O] L 176, 27.6.2013, p. 1.