Bahraini conventional bank licensees must calculate their exposures associated with all derivative transactions including where a Bahraini conventional bank licensee sells protection using a credit derivative, as the replacement cost (RC)28 for the current exposure plus an add-on for PFE, as described in Paragraph CA-15.3.26. If the derivative exposure is covered by an eligible bilateral netting contract as specified in this Section 15.4, the treatment in Chapter CA-4 may be applied29. Written credit derivatives are subject to an additional treatment, as set out in Paragraphs CA-15.3.37 to CA-15.3.39.
Added: October 2018
28 If there is no accounting measure of exposure for certain derivative instruments because they are held (completely) off-balance sheet, the bank must use the sum of positive fair values of these derivatives as the replacement cost.
29 Cross-product netting is not permitted in determining the leverage ratio exposure.
