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CA-3.4.12

Banks should calculate their weighted exposure under the above mentioned contracts according to the Current Exposure Method, which involves calculating the current replacement cost by marking contracts to market, thus capturing the current exposure without any need for estimation, and then adding a factor (the "add-on") to reflect the potential future exposure over the remaining life of the contract.

The 'add-on' factor table:

  Residual maturity of contracts
1 year or less Over 1 year to 5 years Over 5 years
Interest rate related contracts 0.000 0.005 0.015
Foreign exchange & gold contracts 0.010 0.050 0.075
Equity contracts 0.060 0.080 0.100
Precious metals (except gold) 0.070 0.070 0.070
Other commodities 0.120 0.120 0.150