LM-12.4.21

Derivative assets are calculated first based on the replacement cost for derivative contracts (obtained by marking to market) where the contract has a positive value. When an eligible bilateral netting contract is in place that meets the conditions as specified, as per the 'bilateral netting agreements' conditions specified in Appendix F, the replacement cost for the set of derivative exposures covered by the contract will be the net replacement cost.

LM-12.4.22

In calculating NSFR derivative assets, collateral received in connection with derivative contracts may not offset the positive replacement cost amount, regardless of whether or not netting is permitted under the bank's operative accounting or risk-based framework, unless it is received in the form of a cash variation margin and meets the conditions as specified in Appendix G¹⁴. Any remaining balance sheet liability associated with; (a) variation margin received that does not meet the criteria above, or (b) initial margin received, may not offset derivative assets and must be assigned a 0 percent ASF factor.

¹⁴ NSFR derivative assets = (derivative assets) - (cash collateral received as variation margin on derivative assets).