BANK 4.5.4 Obtaining capital relief

(1) To obtain capital relief, the CRM technique and every document giving effect to it must be binding on all parties and enforceable in all the relevant jurisdictions.


When accepting eligible financial collateral, a banking business firm must ensure that any necessary legal procedures have been followed, to ensure that the collateral can be enforced.

Note Under rule 4.2.2, a firm's credit risk management policy must establish effective credit risk administration to monitor documents, legal covenants, contractual requirements, and collateral and other CRM techniques.
(2) A banking business firm must review the enforceability of a CRM technique that it uses. The firm must have a well-founded legal basis for any conclusion about enforceability, and must carry out further reviews to ensure that the technique remains enforceable.


A banking business firm should consider whether independent legal opinion should be sought on the enforceability of documents. The documents should be ready before the firm enters into a contractual obligation or releases funds.
(3) The effects of a CRM technique must not be double-counted. The firm is not allowed to obtain capital relief if:
(a) the risk-weight for the claim or asset is based on an issue-specific rating; and
(b) the ECRA that determined the rating had taken the technique into consideration in doing so.
Amended by QFCRA RM/2015-3 (as from 1st January 2016).