Attachment G — Collateralised transactioAttachment G — Collateralised transactions

Attachment G – Collateralised transactions

1. This Attachment specifies how an ADI:

   1. may apply credit risk mitigation to transactions secured by received collateral, to reduce its exposure amount for the purpose of calculating its Regulatory Capital requirement; and
   2. must determine the EAD for SFTs or, for ADIs that use the simple approach, the risk weights.

2. In this Attachment:

   1. ‘received collateral’ refers to eligible financial collateral (as defined in paragraphs 14 or 22 of this Attachment) that an ADI receives from the counterparty in a transaction, including where the counterparty has lent those securities to the ADI, or the transaction is a reverse repurchase agreement from the ADI’s perspective; and
   2. ‘posted collateral’ refers to collateral that an ADI posts to the counterparty in a transaction, including where the ADI has lent those securities to the counterparty, or the transaction is a repurchase agreement from the ADI’s perspective.

3. An ADI must select either the simple approach or the comprehensive approach and apply that approach consistently to all of its banking book exposures for which it has received collateral. An ADI that is approved to use the internal ratings-based approach to credit risk is not permitted to use the simple approach.

4. For trading book exposures, an ADI must use the comprehensive approach where it has received collateral from the counterparty.

5. Where an ADI acting as an agent in a SFT provides a guarantee that its principal will perform its obligations, the risk to the ADI is the same as if the ADI had entered into the transaction as the principal. In such circumstances, the ADI must calculate a Regulatory Capital requirement as if it were the principal.