CREDIT CONVERSION FACTORS (CCF) UNDER BASEL GUIDELINES
(Annexure to Circular No 32/2013)

In accordance with standardized approach under Basel II, banks may apply CCF percentages for off-balance sheet items determining large exposure limits. Since this is only a summarized list, banks may refer to Basel documents for additional information/ clarification.

1. Credit Conversion Factor of 100%

• All direct credit substitutes, including general guarantees of indebtedness and all guarantee type instruments, such as standby letters of credit and acceptances, backing the financial obligations of other parties.
• Credit derivatives such as credit default swaps where the bank provides credit protection.
• Sale and repurchase agreements and asset sales with recourse, where the credit risk remains with the bank.
• Forward asset purchases, forward deposits and commitments for the unpaid portion of partly-paid shares and securities which represent commitments with certain draw-downs.

2. Credit Conversion Factor of 50%

• Transaction-related contingent items e.g. performance bonds, bid bonds warranties and standby letters of credit related to particular transactions.
• Underwriting commitments under note issuance and revolving underwriting facilities.
• Other commitments -Not unconditionally cancellable with an original maturity exceeding one year.

3. Credit Conversion Factor of 20%

• Other commitments not unconditionally cancellable with an original maturity of one year or less.
• Short-term self-liquidating trade-related contingent items e.g. documentary credits collateralised by underlying shipments.

4. Credit Conversion Factor of 0%

• Any commitment that is unconditionally cancelable.
• Any items of doubt may be referred to Basel Team at the Central Bank for their clarification/ decision.