Attachment H — NettingAttachment H — Netting

Attachment H – Netting

1. An ADI may reduce its exposure amount, for the purpose of calculating its Regulatory Capital requirement, through the application of close-out netting or netting by novation, in accordance with the requirements set out in this Attachment.

2. An ADI that chooses to net transactions must do so on a consistent basis, and must apply netting to all transactions in both the banking book and trading book that are covered by a netting agreement.

3. An ADI that applies netting for Regulatory Capital purposes must have a netting policy that, at a minimum, addresses the requirements in this Prudential Standard. The netting policy must apply to all transactions subject to netting and include systems and controls for:

   1. monitoring and reporting netted transactions on a gross and net basis; and
   2. monitoring and managing roll-off risk and termination risk.

4. An ADI must maintain adequate records to support the application of the netting agreement.