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  • Offsetting Long and Short Positions in the Trading Book

    • CM-2.3.13

      Bahraini conventional bank licensee’s exposure arising from securities’ trading operations is calculated as its net long position in a particular security (a short position in one security issue may not be offset against a long position in another issue made by the same issuer). The licensee’s ‘net long position’ in a security refers to its commitment to buy that security together with its current holdings of the same security, less its commitment to sell these securities.

      Added: June 2022

    • CM-2.3.14

      Positions in the same issue (two issues are defined as the same if the issuer, coupon, currency and maturity are identical) may only be offset for the purpose of calculating large exposure.

      Added: June 2022

    • CM-2.3.15

      Positions in different issues from the same counterparty may be offset only when the short position is junior to the long position, or if the positions are of the same seniority.

      Added: June 2022

    • CM-2.3.16

      For positions hedged by credit derivatives, the hedge may be recognised provided the underlying of the hedge and the position hedged fulfil the provision of Paragraph CM-2.3.15.

      Added: June 2022

    • CM-2.3.17

      When the result of the offsetting is a net short position with a single counterparty, this net exposure need not be considered as an exposure for the purpose of this Chapter.

      Added: June 2022

    • CM-2.3.18

      In order to determine the relative seniority of positions, securities may be allocated into broad buckets of degrees of seniority (for example, ‘equity’, ‘subordinated debt’ and ‘senior debt’).

      Added: June 2022

    • CM-2.3.19

      When the credit protection takes the form of a Credit Default Swap (‘CDS’) and either the CDS provider or the referenced entity is not a financial entity, the amount to be assigned to the credit protection provider is not the amount by which the exposure to the original counterparty is reduced but, instead, the counterparty credit risk exposure calculated in accordance with Module CA .

      Added: June 2022

    • CM-2.3.20

      Bahraini conventional bank licensee must add any exposure to any single counterparty arising in the trading book to any other exposures to that counterparty that lie in the banking book to calculate its total exposure to that counterparty.

      Added: June 2022

    • CM-2.3.21

      Netting across the banking and the trading books is not permitted.

      Added: June 2022