CA-4.2.1
A collateralised transaction is one in which:
(a) Banks have a credit exposure or potential credit exposure; and
(b) That credit exposure or potential credit exposure is hedged in whole or in part by collateral posted by a counterparty14 or by a third party on behalf of the counterparty.
13 See Appendix CA-5 for an overview of methodologies for the capital treatment of transactions secured by financial collateral under the standardised and IRB approaches.
14 In this section "counterparty" is used to denote a party to whom a bank has an on- or off-balance sheet credit exposure or a potential credit exposure. That exposure may, for example, take the form of a loan of cash or securities (where the counterparty would traditionally be called the borrower), of securities posted as collateral, of a commitment or of exposure under an OTC derivatives contract.
Apr 08