Entire Section

  • Recognition of Eligible Financial Collateral under FCSA

    • PIB A4.3.27

      Subject to PIB A4.3.28, an Authorised Firm which has taken eligible financial Collateral for a CR Exposure and is using the FCSA may recognise the effects of Credit Risk mitigation of the eligible financial Collateral as follows:

      (a) break down the Exposure into —
      (i) a collateralised portion with E equal to the latest fair value of the eligible financial Collateral; and
      (ii) an uncollateralised portion with E equal to the E of the CR Exposure less the latest fair value of the eligible financial Collateral;
      and
      (b) for the purposes of calculating the Credit RWA amount pursuant to PIB Rule 4.8.3, use:
      (i) for the collateralised portion, the CRW that is applicable to the eligible financial Collateral as though the Authorised Firm had a direct Exposure to that Collateral; and
      (ii) for the uncollateralised portion, the CRW that is applicable to the obligor.
      Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]

    • PIB A4.3.28

      If the CRW determined in accordance with A4.3.27(b)(i) is less than 20%, an Authorised Firm must apply a CRW of 20% to the collateralised portion of the CR Exposure, except in the following cases:

      (a) a qualifying SFT where the Counterparty in the transaction is a core market participant, in which case the Authorised Firm may apply a risk weight of 0%;
      (b) a qualifying SFT where the Counterparty in the transaction is not a core market participant, in which case the Authorised Firm may apply a risk weight of 10%;
      (c) an OTC Derivative transaction subject to daily mark-to-market that is collateralised by cash, and where there is no currency mismatch, in which case the Authorised Firm may apply a risk weight of 0%;
      (d) an OTC Derivative transaction subject to daily mark-to-market that is collateralised by Exposures to central governments, Central Banks or PSE or a combination thereof qualifying for a 0% risk weight in accordance with the Rules in PIB chapter 4, and where there is no currency mismatch, in which case the Authorised Firm may apply a risk weight of 10%; and
      (e) a transaction where there is no currency mismatch and the Collateral comprises —
      (i) cash on deposit as set out in PIB Rule 4.13.5(a); or
      (ii) Exposures in the central government and Central Bank asset class or in the PSE asset class or a combination thereof qualifying for a 0% risk weight under the Rules in PIB section 4.12, and the latest fair value of such Collateral has been discounted by 20% for the purposes of determining the value of the collateralised portion of the CR Exposure in accordance with PIB Rule A4.3.27(a)(i),
      in which case the Authorised Firm may apply a CRW of 0%.
      Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]

    • PIB A4.3.29

      An Authorised Firm which is using FCSA must not recognise the effects of Credit Risk mitigation of any Collateral with a maturity mismatch.

      Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]