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  • CA-4.5 CA-4.5 Risk Weighting - Off-balance-sheet Items

    • CA-4.5.1

      Off-balance-sheet items must be converted into credit exposure equivalents using credit conversion factors (CCFs).

      Apr 08

    • CA-4.5.2

      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.

      Apr 08

    • CA-4.5.3

      Any commitments that are unconditionally cancellable at any time by the bank without prior notice, or that are subject to automatic cancellation due to deterioration in a borrowers' creditworthiness, will receive a 0% CCF.

      Apr 08

    • CA-4.5.4

      A CCF of 100% must be applied to the lending of banks' securities or the posting of securities as collateral by banks.

      Apr 08

    • CA-4.5.5

      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.

      Apr 08

    • CA-4.5.6

      Where there is an undertaking to provide a commitment on an off-balance sheet item, banks are to apply the lower of the two applicable CCF's.

      Apr 08

    • CA-4.5.7

      Direct credit substitutes, e.g. general guarantees of indebtedness (including standby letters of credit serving as financial guarantees for finance and securities) and acceptances (including endorsements with the character of acceptances) must be applied a CCF of 100%.

      Apr 08

    • CA-4.5.8

      Sale and repurchase agreements and asset sales with recourse, where the credit risk remains with the bank, must be applied a CCF of 100%.

      Apr 08

    • CA-4.5.9

      Forward asset purchases, forward deposits and partly-paid shares and securities, which represent commitments with certain drawdown must be applied a CCF of 100%.

      Apr 08

    • CA-4.5.10

      Certain transaction-related contingent items (e.g. performance bonds, bid bonds, warranties and standby letters of credit related to particular transactions) must be applied a CCF of 50%.

      Apr 08

    • CA-4.5.11

      Note issuance facilities and revolving underwriting facilities must be applied a CCF of 50%.

      Apr 08

    • CA-4.5.12

      Banks 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-5 - 'Capital treatment for failed trades and non DvP transactions'.

      Apr 08

    • CA-4.5.13

      With regard to unsettled securities, commodities, and foreign exchange transactions, banks are encouraged to develop, implement and improve systems for tracking and monitoring the credit risk exposure arising from unsettled transactions as appropriate for producing management information that facilitates action on a timely basis.

      Apr 08

    • CA-4.5.14

      Furthermore, when such transactions are not processed through a delivery-versus-payment (DvP) or payment-versus-payment (PvP) mechanism, banks must calculate a capital charge as set forth in Appendix CA-5.

      Please Note: An import or export financing, which is based on Murabahah where the underlying goods/shipment are collateralised and insured, shall attract a 20% credit conversion factor to the banks that issues or confirms the letter of credit. This treatment of collateral assumes there are no obstacles to the exercise of rights over it by the issuer or confirmer (see "Pledge of assets as collateral as detailed below under Credit Risk Mitigation).

      Apr 08