BANK 3.4.7 How to calculate on-balance-sheet exposures

(1) When a banking business firm calculates its total exposure measure, it must include all on-balance-sheet items on the assets side of its balance-sheet, including the collateral of derivatives contracts and securities financing contracts.
(2) On-balance-sheet non-derivative assets must be measured using their balance-sheet (that is, unweighted) values less deductions for associated provisions.
(3) If the firm holds an asset in a fiduciary capacity, it may exclude the asset if the asset meets the accounting criteria for de-recognition and, if applicable, the accounting criteria for deconsolidation.
(4) Items that are deducted completely from the firm's tier 1 capital (such as goodwill) must also be deducted from its total exposure measure.
(5) The amount of an investment in the capital of an unconsolidated financial entity that is wholly or partly deducted from the firm's CET 1 or additional tier 1 capital under the corresponding deduction approach (set out in Subdivision 3.2.D.3) or the threshold deduction approach (set out in Subdivision 3.2.D.4) must be deducted from the firm's total exposure measure. An unconsolidated financial entity is a financial entity (that is, an entity involved in banking or other financial activity, or insurance) that is not included in the firm's consolidated returns.
(6) Liability items must not be deducted from the firm's total exposure measure.
Inserted by QFCRA RM/2019-6 (as from 1st January 2020).