Guarantees and Credit Derivatives
CA-4.2.21
Where guarantees or credit derivatives are direct, explicit, irrevocable and unconditional, and the CBB is satisfied that banks fulfil certain minimum operational conditions relating to risk management processes they may allow banks to take account of such credit protection in calculating capital requirements.
Apr 08CA-4.2.22
A range of guarantors and protection providers are recognised, as shown in paragraph CA-4.5.7. A substitution approach will be applied. Thus only guarantees issued by or protection provided by entities with a lower risk weight than the counterparty will lead to reduced capital charges since the protected portion of the counterparty exposure is assigned the risk weight of the guarantor or protection provider, whereas the uncovered portion retains the risk weight of the underlying counterparty.
Apr 08
