Entire Section
PIB A4.2 PIB A4.2 Credit Conversion Factors (CCFs) for Calculating Exposures
CCFs for Off-Balance Sheet CR Exposures
PIB A4.2.1 PIB A4.2.1
The applicable CCFs for off-balance sheet
CR Exposures are provided in the table below.Description of Off-balance Sheet Item CCF (a) Direct credit substitutes 100% (b) Transaction -related contingent items50% (c) Short-term self-liquidating trade-related contingent items (applicable to both issuing and confirming banks) and commitments to underwrite debt and equity Securities 20% (d) Note issuance facilities and revolving Underwriting facilities50% (e) Transactions , other than SFTs, involving the posting ofSecurities held by theAuthorised Firm asCollateral 100% (f) Asset sales with recourse, where the Credit Risk remains with theAuthorised Firm 100% (g) Other commitments with certain drawdown 100% (h) Other commitments (i) with anOriginal Maturity of more than one year(ii) with anOriginal Maturity of one year or less(iii) which are unconditionally cancellable at any time by theAuthorised Firm without prior notice, or that effectively provide for automatic cancellation due to deterioration in an obligor's creditworthiness50%
20%
0%Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]PIB A4.2.1 Guidance
1. In cases where there is an undertaking to provide a commitment on another off-balance sheetExposure , anAuthorised Firm should apply the lower of the applicable CCFs. Examples of direct credit substitutes include general guarantees of indebtedness, standby letters of credit serving as financial guarantees for loans andSecurities , and acceptances (including endorsements with the character of acceptances). Examples of transaction-related contingent items include performance bonds, bid bonds, warranties and standby letters of credit related to particular transactions.2. Documentary credits collateralised by the underlying shipments are an example of short-term self-liquidating trade-related contingent items. In respect of item (f) in the table above, the terms of the agreement should be such that there is no substantial transfer of all risks and rewards of ownership to theCounterparty . Other commitments with certain drawdown would include forward purchase, forward deposits and partly paidSecurities . Formal standby facilities and credit lines are examples of other commitments, referred to in item (h) of the table above.3. In respect of item (h)(iii) in the table above, anAuthorised Firm , if required to by theDFSA , should be able to demonstrate that it actively monitors the financial condition of the obligor, and that its internal control systems are such that it is able to cancel the facility upon evidence of a deterioration in the credit quality of the obligor.Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]CCFs for Off-Balance Sheet SE Exposures
PIB A4.2.2 PIB A4.2.2
(1) The applicable CCFs for off-balance sheet SEExposures are provided in the table below.
Description of off-balance sheet item CCF (a) Unrated eligible liquidity facilities 50% (b) Eligible Servicer cash advance facilities0% (c) Others 100% (2) AnAuthorised Firm must notify theDFSA if it intends to provide eligibleServicer cash advance facilities and when there is a drawdown.Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]PIB A4.2.2 Guidance
Eligible
Servicer cash advance facilities refers to undrawnServicer cash advances or facilities that are contractually provided for and unconditionally cancellable without prior notice, so long as theServicer is entitled to full reimbursement and this right is senior to other claims on cash flows from the underlyingExposures .Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]