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  • PRU A4.7 PRU A4.7 Credit RWA — repurchase agreements, reverse repurchase agreements, similar transactions and other deferred settlements

    • PRU A4.7.1

      This Section applies to transactions in the Trading Book in relation to repurchase agreements, reverse repurchase agreements, similar transactions and deferred settlements.

    • PRU A4.7.2

      For repurchase agreements and reverse repurchase agreements the formula for Credit RWA, which must be calculated from T, is as follows:

      Credit RWA = E × CRW.

    • PRU A4.7.3

      For repurchase agreements:

      E = MV of the Securities sold - value of the Collateral or cash received.

    • PRU A4.7.4

      For reverse repurchase agreements:

       E = Amount paid or Collateral given — MV of the Securities received.

    • PRU A4.7.5

      If the E calculated is negative:

      Credit RWA = 0.

    • PRU A4.7.6

      The MV of Securities and the value of cash lodged must include accrued interest.

    • PRU A4.7.7

      The MV of Securities and the value of Collateral under A4.7.3 to A4.7.6 should be calculated in accordance with the CRM provisions set out in Section 4.13.

    • PRU A4.7.8

      For deferred settlement purchases and sales transactions over the spot period: Credit RWA = 0.

    • PRU A4.7.9

      The 'spot period' means the shortest time between T and:

      (a) the contractual settlement date;
      (b) the normal local market settlement date; and
      (c) T + five business days.

    • PRU A4.7.10

      For deferred settlement purchases and sales transactions with a contractual settlement date after the spot period as set out above but less than (T + five business days):

      Credit RWA = E x CRW.

    • PRU A4.7.11

      Not currently in use.

    • PRU A4.7.12 PRU A4.7.12

      For deferred settlement purchases and sales transactions with a contractual settlement date exceeding (T + five business days):

      Credit RWA = E x CRW x the appropriate percentage from the table below:

       

      Number of business days calculated from
      T      		 Percentages used for calculation of Credit RWA on deferred settlement transactions
      6–30 500%
      31–45 750%
      46 or more 1000%

      • Guidance

        Credit RWA for deferred settlement transactions applies even if the deferred settlement contract is not overdue.