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  • Collateralised Transactions

    • CA-4.2.1

      A collateralised transaction is one in which:

      (a) Conventional bank licensees have a credit exposure or potential credit exposure; and
      (b) That credit exposure or potential credit exposure is hedged in whole or in part by collateral posted by a counterparty17 or by a third party on behalf of the counterparty.

      17 In this section "counterparty" is used to denote a party to whom a bank has an on- or off-balance sheet credit exposure or a potential credit exposure. That exposure may, for example, take the form of a loan of cash or securities (where the counterparty would traditionally be called the borrower), of securities posted as collateral, of a commitment or of exposure under an OTC derivatives contract.

      January 2015

    • CA-4.2.2

      Where conventional bank licensees take eligible financial collateral (e.g. cash or securities, more specifically defined in Paragraphs CA-4.3.1 and CA-4.3.2, they are allowed to reduce their credit exposure to a counterparty when calculating their capital requirements to take account of the risk mitigating effect of the collateral.

      January 2015