• Measurement of E for pre-settlement Counterparty Exposures arising from SFTs

    • PRU 4.9.13

      An SFT must be treated as collateralised lending, notwithstanding the wide range of structures which could be used for SFTs.

    • PRU 4.9.14

      An Authorised Person must calculate E, for a pre-settlement Counterparty Exposure arising from an SFT, other than an Exposure covered by a qualifying cross-product Netting agreement, in accordance with Rules 4.9.15 to 4.9.20.

    • PRU 4.9.15

      An Authorised Person must determine E, for a pre-settlement Counterparty Exposure arising from an SFT which is not covered by a qualifying cross-product Netting agreement as follows:

      (a) in the case where the Authorised Person has lent Securities to a Counterparty or sold Securities to a Counterparty with a commitment to repurchase those Securities at a specified price on a specified future date, the latest fair value of the Securities lent or sold; and
      (b) in the case where the Authorised Person has lent cash to a Counterparty through the borrowing of Securities from the Counterparty or paid cash for the purchase of Securities from a Counterparty with a commitment to resell those Securities at a specified price on a specified future date, the amount of cash lent or paid.

    • PRU 4.9.16

      An Authorised Person which has taken eligible financial Collateral for any SFT where the pre-settlement Counterparty Exposure is determined in accordance with Rule 4.9.15 may recognise the effect of such Collateral in accordance with Rules 4.9.17 to 4.9.20.

    • PRU 4.9.17

      An Authorised Person must use either the FCSA or the FCCA to recognise the effect of eligible financial Collateral for any SFT in the Non-Trading Book. The Authorised Person must apply the chosen approach consistently to the entire Non-Trading Book and must not use a combination of both approaches. For a pre-settlement Counterparty Exposure arising from any SFT in the Trading Book, an Authorised Person must only use the FCCA to recognise the effect of eligible financial Collateral.

    • PRU 4.9.18

      An Authorised Person using the FCSA may recognise the effect of eligible financial Collateral for any SFT in accordance with Rules A4.3.27 to A4.3.29 in App4.

    • PRU 4.9.19

      An Authorised Person which has taken eligible financial Collateral for any SFT that is not covered by a qualifying bilateral Netting agreement and using the FCCA, must calculate E* in accordance with Rules A4.3.2 to A4.3.6 in App4, and substitute E* for E when calculating the Credit Risk-weighted Exposure amount for that CR Exposure under Section 4.8.

    • PRU 4.9.20

      An Authorised Person which has taken eligible financial Collateral for an SFT that is covered by a qualifying bilateral Netting agreement and using the FCCA, must calculate E* for all its CR Exposures to any single Counterparty covered by the qualifying bilateral Netting agreement, in accordance with Rules A4.3.2 to A4.3.6 in App4 (if the Authorised Person is using supervisory haircuts or own-estimate haircuts), and substitute E* for E when calculating the Credit Risk-weighted Exposure amount for its CR Exposures to that Counterparty under Section 4.8.