CA-3.3 CA-3.3 Off-balance Sheet Items
CA-3.3.1
Off-balance-sheet items must be converted into credit exposure equivalents applying credit conversion factors (CCFs). Counterparty risk weightings for OTC derivative transactions will not be subject to any specific ceiling.
January 2015CA-3.3.2
Commitments with an original maturity of up to one year and commitments with an original maturity of over one year will receive a CCF of 20% and 50%, respectively.
January 2015CA-3.3.3
Any commitments that are unconditionally cancellable at any time by the
conventional bank licensee without prior notice, or that are subject to automatic cancellation due to deterioration in a borrowers' creditworthiness, will receive a 0% CCF.January 2015CA-3.3.4
Direct credit substitutes, e.g. general guarantees of indebtedness (including standby letters of credit serving as financial guarantees for loans and securities) and acceptances (including endorsements with the character of acceptances) must receive a CCF of 100%.
January 2015CA-3.3.5
Sale and repurchase agreements and asset sales with recourse, where the
credit risk remains with theconventional bank licensee , must receive a CCF of 100%.January 2015CA-3.3.6
A CCF of 100% must be applied to the lending of other banks' securities or the posting of securities as collateral by banks, including instances where these arise out of repo-style transactions (i.e. repurchase/reverse repurchase and securities lending/securities borrowing transactions). See Section CA-4.3 for the calculation of risk-weighted assets where the credit converted exposure is secured by eligible collateral.
January 2015CA-3.3.7
Forward asset purchases, forward deposits and partly-paid shares and securities, which represent commitments with certain drawdown must receive a CCF of 100%.
January 2015CA-3.3.8
Certain transaction-related contingent items (e.g. performance bonds, bid bonds, warranties and standby letters of credit related to particular transactions) must receive CCF of 50%.
January 2015CA-3.3.9
Note issuance facilities and revolving underwriting facilities must receive a CCF of 50%.
January 2015CA-3.3.10
For short-term self-liquidating trade letters of credit arising from the movement of goods, a 20% CCF must be applied to both issuing and confirming banks.
January 2015CA-3.3.11
Where there is an undertaking to provide a commitment on an off-balance sheet item,
conventional bank licensees are to apply the lower of the two applicable CCFs.January 2015CA-3.3.12
The credit equivalent amount of OTC derivatives and
SFTs that expose aconventional bank licensee to counterparty credit risk must be calculated as per Appendix CA-2.January 2015CA-3.3.13
Conventional bank licensees must closely monitor securities, commodities, and foreign exchange transactions that have failed, starting the first day they fail. A capital charge to failed transactions must be calculated in accordance with CBB guidelines set forth in Appendix CA-4 (Capital treatment for failed trades and non-DvP transactions).January 2015CA-3.3.14
With regard to unsettled securities, commodities, and foreign exchange transactions,
conventional bank licensees are encouraged to develop, implement and improve systems for tracking and monitoring thecredit risk exposure arising from unsettled transactions as appropriate for producing management information that facilitates action on a timely basis.January 2015CA-3.3.15
Furthermore, when such transactions are not processed through a delivery-versus-payment (DvP) or payment-versus-payment (PvP) mechanism,
conventional bank licensees must calculate a capital charge of up to 1,250% as set forth in Appendix CA-4.January 2015
