BANK 3.4.19 SFT exposures — firm acting as agent

(1) If a banking business firm that is acting as an agent in a securities financing contract provides an indemnity or guarantee to a customer or counterparty for any difference between the value of the security or cash that the customer has lent and the value of the collateral that the borrower has provided, the firm must calculate its exposure in accordance with rule 3.4.18 (3).
(2) The firm may apply the treatment in subrule (1) only if:
(a) the firm's exposure to the contract is limited to the guaranteed difference between the value of the security or cash that its customer has lent and the value of the collateral that the borrower has provided; and
(b) the firm does not own or control the underlying cash or security.
(3) If the firm is exposed to the underlying security or cash in the contract to a greater extent than a guarantee for the difference, the firm must include, in the exposure, a further exposure equal to the full amount of the security or cash.

Example

The firm might be further exposed by managing collateral received in its own name or on its own account rather than on the customer's or borrower's account, by on-lending or managing unsegregated collateral, cash or securities.

Note When a banking business firm that is acting as agent in a securities financing contract does not provide an indemnity or guarantee to any of the parties, the firm has no exposure to the contract, and must set the relevant exposure to zero.
Inserted by QFCRA RM/2019-6 (as from 1st January 2020).