5.3. Recognition of CRM Techniques in Reduction of Original Exposure
Effective from Sep 08 2019 - Sep 07 2019
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| A bank must reduce the value of the exposure to the original counterparty by the amount of the eligible CRM technique recognised for risk-based capital requirements purposes. This recognised amount is: | ||
| a. | the value of the protected portion in the case of unfunded credit protection; | |
| b. | the value of the portion of claim collateralised by the market value of the recognised financial collateral when the bank uses the simple approach for risk-based capital requirements purposes; | |
| c. | the value of the collateral adjusted after applying the required haircuts, in the case of financial collateral when the bank applies the comprehensive approach. The haircuts used to reduce the collateral amount are the supervisory haircuts under the comprehensive approach.10 Internally modelled haircuts must not be used. | |
| d. | the value of the collateral as recognized in the calculation of the counterparty credit risk exposure value for any instruments with counterparty credit risk, such as over the counter (OTC) derivatives; | |
10 GN 2, Page 14, of Basle II Package of Bank Prudential Returns and Guidance Notes Concerning Standardized Approach, 2007 and Chapter 6.1, Page 157, Basel II - SAMA's Detailed Guidance Document, 2006.