Book traversal links for D. On-Balance Sheet Netting
D. On-Balance Sheet Netting
C 52/2017 STA Effective from 1/12/2022120.A bank may use the net exposure of loans and deposits as the basis for its capital adequacy calculation in accordance with the formula in Paragraph 97, where the bank:
- (i)Has a well-founded legal basis for concluding that the netting or offsetting agreement is enforceable in each relevant jurisdiction regardless of whether the counterparty is insolvent or bankrupt;
- (ii)Is able at any time to determine those assets and liabilities with the same counterparty that are subject to the netting agreement;
- (iii)Monitors and controls its roll-off risks; and
- (iv)Monitors and controls the relevant exposures on a net basis.
121.Assets (loans) are treated as exposure and liabilities (deposits) as collateral. The haircuts will be zero except when a currency mismatch exists. A 10-business day holding period will apply when daily mark-to-market is conducted and all the requirements stipulated under paragraphs 101, 107, and 137 to 140 will apply.