BANK 4.5.10 Risk-weight for cash collateral
(1) A banking business firm may apply a zero per cent risk-weight to cash collateral if the collateral is held by the firm itself.
(2) The firm may apply a zero per cent risk-weight to cash collateral held by another member of the financial group of which the firm is a member if the agreement between the firm and the party lodging the collateral requires the holder of the collateral to act in accordance with the agreement.
(3) If cash collateral is held by a bank under a non-custodial arrangement, and the collateral is lodged with the firm under an agreement that establishes the firm’s irrevocable and unconditional recourse to the collateral, the exposure covered by the collateral (after any necessary haircuts for currency risk) may be assigned the risk-weight of the bank.
(4) If cash collateral is held by an independent custodian (other than a central counterparty), the risk-weight of the holder of the collateral must be used. However, the firm may apply a zero per cent risk-weight to notes and coins held by an independent custodian.
|Derived from QFCRA RM/2014-2 (as from 1st January 2015).|