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  • Credit Risk Mitigation — Collateral

    • PIB A4.12.11

      Under the Simplified Approach, Rules PIB 4.13.5 to PIB 4.13.7 are replaced by the following Rules PIB A4.12.12 to PIB A4.12.14.

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

    • PIB A4.12.12

      An Authorised Firm may only use the financial Collateral Simplified Approach (FCSA) in its treatment of recognised Collateral for the purposes of calculating the Credit RWA for its Exposures booked in its Non-Trading Book.

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

    • PIB A4.12.13

      (1) For an Authorised Firm using the FCSA, eligible financial Collateral comprises:
      (a) cash (as well as certificates of deposit or other similar instruments issued by the Authorised Firm) on deposit with the Authorised Firm;
      (b) gold;
      (c) any debt securities issued by sovereigns (including a central government or Central Bank) of a jurisdiction that that has an ECA country risk score of 4 or better; and
      (d) any debt securities issued by a PSE that is treated as a sovereign and is of a jurisdiction that has an ECA country risk score of 4 or better.
      (2) Cash-funded credit-linked notes issued by an Authorised Firm against Exposures in the Non-Trading Book which fulfil the criteria for eligible Credit Derivatives must be treated as cash collateralised transactions.
      (3) Cash, mentioned in (1)(a) includes cash on deposit, certificates of deposit or other similar instruments issued by the Authorised Firm that are held as Collateral at a third-party bank in a non-custodial arrangement and that are pledged or assigned to the Authorised Firm. This is subject to the pledge or assignment being unconditional and irrevocable. Under the FCSA, the risk weight to be applied to the Exposure covered by such Collateral must be the risk weight of the third-party bank.
      Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]

    • PIB A4.12.14

      In the case of any Counterparty Risk Exposures in Rules PIB A4.12.12 and PIB A4.12.13, arising from an SFT which is included in the Trading Book, eligible financial Collateral includes all instruments which an Authorised Firm may include in its Trading Book.

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