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

E* = Max {0, [(∑(E) – ∑(C)) + ∑ (E_S x H_S) + ∑ (E_FX x H_FX)]}²⁹

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

²⁹ The 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)]}