(1) In case of
Credit Derivatives including but not limited to total return swaps and credit default swaps, an Authorised Firm must determine its PFCE by multiplying the nominal amount of the instrument by the following percentages:
(a) 5% where the reference obligation of the
Credit Derivative is one that if it gave rise to a direct Exposure of the Authorised Firm would be a qualifying reference obligation; or
(b) 10% where the reference obligation is one that if it gave rise to a direct
Exposure of the Authorised Firm would not be a qualifying reference obligation.
(2) For the purposes of this
Rule, a "qualifying reference obligation" means any Security that is issued by any MDB, any Security (including one issued by a PSE) that has a Credit Quality Grade of 3 or better as set out in PIB section 4.12 based on the external credit assessment of at least one recognised external credit rating agency, and any unrated Security issued by a PSE which belongs to a country with a Credit Quality Grade of 1 as set out in PIB section 4.12.
Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]