5.Banks must calculate RWA for CCR at the level of nettings sets for derivatives. Accordingly, a bank must group all exposures for each counterparty into one or more netting sets. In every such case where netting is applied, a bank must satisfy the Central Bank that it has:

• •A contract with the counterparty or other agreement that creates a single legal obligation, covering all included transactions, such that the bank would have either a claim to receive or obligation to pay only the net sum of the positive and negative mark-to-market values of included individual transactions in the event a counterparty fails to perform due to default, bankruptcy, liquidation, or similar circumstances.
• •Written and reasoned legal reviews that in the event of a legal challenge, the relevant courts and administrative authorities would find the bank’s exposure to be such a net amount under:
  • •The law of the jurisdiction in which the counterparty is chartered and, if the foreign branch of a counterparty is involved, then also under the law of the jurisdiction in which the branch is located;
  • •The law that governs the individual transactions; and
  • •The law that governs any contract or agreement necessary to affect the netting.
• •Procedures in place to ensure that the legal characteristics of netting arrangements are kept under review in light of the possible changes in relevant law.

6.The Central Bank, after consultation when necessary with other relevant supervisors, must be satisfied that the netting is enforceable under the laws of each of the relevant jurisdictions.