For banks using the standard haircuts, the framework below will apply to take into account the impact of master netting agreements.

E* = max {0, [(Σ(E) - Σ(C)) + Σ (E_S × H_S) +Σ (E_FX × H_FX)]}²⁵

where:

E* = the exposure value after risk mitigation

E = current value of the exposure

C = the value of the collateral received

E_S = absolute value of the net position in a given security

H_S = haircut appropriate to E_S

E_FX = absolute value of the net position in a currency different from the settlement currency

H_FX = haircut appropriate for currency mismatch

²⁵The starting point for this formula is the formula in paragraph CA-4.3.3 which can also be presented as the following: E* = max {0, [(E - C) + (E x He) + (C x Hc) + (C x Hfx)]}