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CA-2.4.12

Past version: Effective from 01 Jan 2015 to 31 Mar 2015
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All of a conventional bank licensee's investments in its own common shares, whether held directly or indirectly, or held as collateral against exposures to customers, must have already been deducted in the calculation of CET1 as required by Subparagraph CA-2.1.3(o). In addition, any own stock which the conventional bank licensee could be contractually obliged to purchase must be deducted in the calculation of CET1. The treatment described applies irrespective of the location of the exposure in the banking book or the trading book. In addition:

(a) Gross long positions may be deducted net of short positions in the same underlying exposure only if the short positions involve no counterparty risk (i.e. this would normally mean that the long and short positions are with the same counterparty and a valid close-out netting agreement is in place); and
(b) Conventional bank licensees must look through holdings of index securities to deduct exposures to own shares. However, gross long positions in own shares resulting from holdings of index securities may be netted against short positions in own shares resulting from short positions in the same underlying index where they are undertaken with the same counterparty. In such cases the short positions may still involve counterparty risk (which is subject to the relevant counterparty credit risk charge).
January 2015