First-to-default Credit Derivatives
CA-4.7.2
There are cases where a
conventional bank licensee obtains credit protection for a basket of reference names and where the first default among the reference names triggers the credit protection and the credit event also terminates the contract. In this case, theconventional bank licensee may recognise regulatory capital relief for the asset within the basket with the lowest risk-weighted amount, but only if the notional amount is less than or equal to the notional amount of the credit derivative.January 2015CA-4.7.3
With regard to the
conventional bank licensee providing credit protection through such an instrument, if the product has an external credit assessment from an eligible credit assessment institution, the risk weight in Paragraph CA-6.4.8 applied to securitisation tranches will be applied. If the product is not rated by an eligible external credit assessment institution, the risk weights of the assets included in the basket will be aggregated up to a maximum of 1250% and multiplied by the nominal amount of the protection provided by the credit derivative to obtain the risk-weighted asset amount.January 2015
