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  • Treatment of Related Collateral

    • CA-15.3.31

      Collateral received in connection with derivative contracts has two countervailing effects on leverage:

      (a) It reduces counterparty exposure; but
      (b) It can also increase the economic resources at the disposal of the Bahraini conventional bank licensees, as the bank can use the collateral to leverage itself.
      Added: October 2018

    • CA-15.3.32

      Collateral received in connection with derivative contracts does not necessarily reduce the leverage inherent in a Bahraini conventional bank licensee's derivatives position, which is generally the case if the settlement exposure arising from the underlying derivative contract is not reduced. As a general rule, collateral received may not be netted against derivative exposures whether or not netting is permitted under IFRS or in Chapter CA-4. Hence, when calculating the exposure amount by applying Paragraphs CA-15.3.25 to CA-15.3.27, a Bahraini conventional bank licensee must not reduce the exposure amount by any collateral received from the counterparty.

      Added: October 2018

    • CA-15.3.33

      With regard to collateral provided, Bahraini conventional bank licensees must gross up their exposure measure by the amount of any derivatives collateral provided where the provision of that collateral has reduced the value of their balance sheet assets under IFRS.

      Added: October 2018