CA-4.7.27

A maturity mismatch is a situation where the residual maturity of the CRM is less than that of the underlying credit exposure. In the case of a maturity mismatch with the CRM having a maturity of less than one year, the CRM is not recognised. This means that a CRM with a maturity mismatch is only permitted where its original maturity is at least one year. The simple approach must not be used for CRM with maturity mismatches.

CA-4.7.28

The following adjustment must be applied for a CRM with a maturity mismatch:

Pa = P x (t -0.25) / (T – 0.25), where:

Pa = adjusted value of risk mitigation

P = value of risk mitigation used (e.g. collateral or guarantee amount)

T = min (5, residual maturity of the exposure) in years

t = min (T, residual maturity of the risk mitigation) in years