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  • CA-3.3 CA-3.3 Risk weighting – Off-balance-sheet items

    • CA-3.3.1

      The framework takes account of the credit risk on off-balance-sheet exposures by applying credit conversion factors to the different types of off-balance-sheet instruments or transactions (with the exception of derivatives).

      October 07

    • CA-3.3.2

      The conversion factors are derived from the estimated size and likely occurrence of the credit exposure, as well as the relative degree of credit risk as identified in the Basel Committee's paper on 'The management of banks' off-balance-sheet exposures: a supervisory perspective' (see www.bis.org/publ/bcbsc134.pdf) issued in March 1986.

      October 07

    • CA-3.3.3

      The credit conversion factors applicable to the off-balance-sheet items are set out in the table below:

      Credit Conversion factors Off-balance-sheet items
      100% Direct credit substitutes, including general guarantees of indebtedness and acceptances
      50% Transaction-related contingent items (e.g. performance bonds, bid bonds, warranties and standby letters of credit related to particular transactions)
      20% Short-term self-liquidating trade-related contingencies (such as documentary credits collateralised by the underlying shipments)
      100% Sale and repurchase agreements and asset sales with recourse, where the credit risk remains with the bank
      100% Forward asset purchases, forward forward deposits and the unpaid part of partly-paid shares and securities, which represent commitments with certain draw-down
      50% Underwriting commitments under note issuance and revolving underwriting facilities (minus own holdings of notes underwritten)
      50% Other commitments (e.g. formal standby facilities and credit lines) with an original maturity of 1 year and over
      0% Similar commitments with an original maturity of up to 1 year, or which can be unconditionally cancelled at any time
      October 07

    • CA-3.3.4

      The applicable credit conversion factors should be multiplied by the weights applicable to the Category of the counterparty as set out below:

      Risk weights Counterparty
      0% Type (a)
       
      •   The Government of Bahrain.
      •   Bahrain public sector entities.
      •   Government-owned (non-banking) GCC companies incorporated in Bahrain.
      •   Central government and central banks of Group A countries.
      20% Type (b)
       
      •   Banks incorporated in Bahrain or Group A countries and securities firms.
      •   Banks incorporated in Group B countries (if the commitment has a residual life of 1 year or less).
      •   Public sector entities in Group A countries.
      •   Government-owned (non-banking) GCC companies incorporated outside Bahrain.
      100% Type (c)
       
      •   Banks incorporated in Group B countries (if the commitment has a residual life of more than 1 year).
      •   Central governments, central banks and public sector entities in Group B countries.
      •   Government-owned companies incorporated in non-GCC countries.
      •   Private sector persons and entities in Bahrain and abroad.
      October 07