PIB A4.9 PIB A4.9 Exposures to Central Counterparties (CCPs)
Authorised Firmmay determine the Exposurevalue of a Credit Risk Exposureoutstanding with a CCP in accordance with PIB A4.9.2, provided that the CCP's Counterparty Credit Risk Exposurewith all participants in its arrangements are fully collateralised on a daily basis and the CCP is a qualifying CCP.
Authorised Firmmay attribute an Exposurevalue of zero, for purposes of calculating the CRCOMto Derivativecontracts and deferred settlement transactions, or to other Exposuresarising in respect of those contracts or transactions (excluding an Exposurearising from Collateralheld with CCPs as part of its default fund) where such Exposuresare outstanding with a CCP and have not been rejected by the CCP.
Authorised Firmwhich purchases Credit Derivativeprotection against a Non-Trading Book Exposureor against a Counterparty Credit Risk Exposure, must compute Market Risk Capital Requirementsfor the hedged asset in accordance with the relevant Rulesin PIB chapter 5.
Authorised Firmmust assign an Exposurevalue of zero for purposes of determination of CRCOM, for credit default swaps sold by it, where such credit default swaps are treated as credit protection provided by the Authorised Firmand subject to a Capital Requirementfor Credit Riskfor the full amount.
Credit Default Products
PIB A4.9.5(1) The
Protection Buyerrelies on the Protection Sellerto pay the Credit Event Paymentif a Credit Eventoccurs, and therefore must compute Credit RWAsfor the Counterparty Riskinvolved.(2) The Protection Selleris exposed to the Protection Buyeronly if there are premium or interest rate-related payments outstanding.
In the case of
Total Return Swaps, since each party relies on the other for payment, each party must compute Credit RWAs.
Credit RWAapplies to credit-linked notesunless a coupon or interest payment is outstanding.
PIB A4.9.81) An Authorised Firm shall determine the Exposure value for clearing Exposures to non-qualifying CCPs as the amount in the table below:
Type of Clearing Exposure Exposure Amount Segregated initial margin Nil Non-segregated initial margin Nominal amount of initial margin posted Pre-funded default fund contributions Nominal amount of the funded contribution Unfunded default fund contributions Nil Equity stakes Nominal amount(2) For the purposes of (1), a “non-qualifying CCP” is a CCP that does not meet the criteria set out in the definition of a Qualifying CCP in PIB Rule 1.2.1.Derived from DFSA RMI293/2021 (Made 24th February 2021). [VER38/04-21]