CA-8.3.5

The counterparty credit risk charge for single name credit derivative transactions in the trading book will be calculated applying the following potential future exposure add-on factors:

There will be no difference depending on residual maturity.

The definition of "qualifying" is the same as for the "qualifying" category for the treatment of specific risk under the standardised measurement method in chapter CA-9.

** The protection seller of a credit default swap shall only be subject to the add-on factor where it is subject to closeout upon the insolvency of the protection buyer while the underlying is still solvent. Add-on should then be capped to the amount of unpaid premiums.

CA-8.3.6

Where the credit derivative is a first to default transaction, the add-on will be determined by the lowest credit quality underlying in the basket, i.e. if there are any non-qualifying items in the basket, the non-qualifying reference obligation add-on should be used. For second and subsequent to default transactions, underlying assets should continue to be allocated according to the credit quality, i.e. the second lowest credit quality will determine the add-on for a second to default transaction etc.