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  • IRC-covered Positions and Risks

    • CA-14.13.1

      According to Paragraph CA-14.11.7, the IRC encompasses all positions subject to a capital charge for specific interest rate risk according to the internal models approach to specific market risk but not subject to the treatment outlined in Paragraphs CA-9.2.11A, and CA-9.2.11B and C, regardless of their perceived liquidity.

      Added: January 2012

    • CA-14.13.2

      With CBB approval, a bank can choose consistently to include all listed equity and derivatives positions based on listed equity of a desk in its incremental risk model when such inclusion is consistent with how the bank internally measures and manages this risk at the trading desk level. If equity securities are included in the computation of incremental risk, default is deemed to occur if the related debt defaults (as defined in Paragraphs CA-5.8.63 and CA-5.8.64).

      Added: January 2012

    • CA-14.13.3

      However, when computing the IRC, a bank is not permitted to incorporate into its IRC model any securitisation positions, even when securitisation positions are viewed as hedging underlying credit instruments held in the trading account.

      Added: January 2012

    • CA-14.13.4

      For IRC-covered positions, the IRC captures:

      (a) Default risk. This means the potential for direct loss due to an obligor's default as well as the potential for indirect losses that may arise from a default event; and
      (b) Credit migration risk. This means the potential for direct loss due to an internal/external rating downgrade or upgrade as well as the potential for indirect losses that may arise from a credit migration event.
      Added: January 2012