CA-4.3.30

Under the Current Exposure Method, the calculation of the counterparty credit risk charge for an individual contract will be as follows:

Counterparty charge = [(RC + add-on) - C_A] × r × 8%

Where:

RC = The replacement cost,

Add-on = The amount for potential future exposure calculated in CBB's 2004 Rule Book.

C_A = The volatility adjusted collateral amount under the comprehensive approach prescribed in paragraphs CA-4.3.3 to CA-4.3.16, or zero if no eligible collateral is applied to the transaction, and

r = The risk weight of the counterparty.

CA-4.3.31

When effective bilateral netting contracts are in place, RC will be the net replacement cost and the add-on will be A_Net as calculated according to paragraph 96 (i) to 96 (vi) of Appendix 2. The haircut for currency risk (H_fx) should be applied when there is a mismatch between the collateral currency and the settlement currency. Even in the case where there are more than two currencies involved in the exposure, collateral and settlement currency, a single haircut assuming a 10-business day holding period scaled up as necessary depending on the frequency of mark-to-market will be applied.

CA-4.3.32

As an alternative to the Current Exposure Method for the calculation of the counterparty credit risk charge, banks may also use the Standardised Method and, subject to CBB's approval, the Internal Model Method as set out in Appendix CA-2 of this Module.