BANK 4.5.5 Standard haircuts to be applied

(1) A banking business firm must use the standard haircuts (expressed in percentages) set out in this rule in any calculation relating to credit risk mitigation. The haircuts are applied after risk mitigation to calculate adjusted exposures and are intended to take into account possible future price fluctuations.
(2) In table 4.5.5A:

other issuers include banks, corporates, and public sector enterprises that are not treated as sovereigns.

sovereign includes a multilateral development bank, and a non-commercial public sector enterprise, that has a zero per cent risk-weight.

Table 4.5.5A Haircuts for debt securities

column 1 item column 2 credit rating for debt securities column 3 residual maturity % column 4 sovereigns % column 5 other issuers %
1 AAA to AA-/A-1 (long-term and short-term) 1 year 0.5 1
>1 year, 5 years 2 4
> 5 years 4 8
2 A+ to BBB-/ A-2/A-3/P-3 (long-term and short-term) and unrated bank securities that are eligible financial collateral 1 year 1 2
>1 year, 5 years 3 6
> 5 years 6 12
3 BB+ to BB- (long-term) All 15 Not applicable
4 securities issued by the State of Qatar or the Qatar Central Bank 1 year 1 Not applicable
>1 year, 5 years 3 Not applicable
>5 years 6 Not applicable

Note    Table 4.5.5A item 3, column 5: securities rated BB+ or below are eligible financial collateral only if issued by a sovereign or non-commercial public sector enterprise — see rule 4.5.7 (1) (c) (i).

Table 4.5.5B Haircuts for other assets

column 1 item column 2 description of assets column 3 haircut %
1 main index equities (including convertible bonds) and gold 15
2 other equities (including convertible bonds) listed on a recognised exchange 25
3 units in listed trusts, undertakings for collective investments in transferable securities (UCITS), mutual funds and tracker funds highest haircut applicable to any security in which the entity can invest
4 cash collateral denominated in the same currency as the collateralised exposure 0
(3) If a CRM technique (other than a guarantee) and the exposure covered by it are denominated in different currencies (that is, there is a currency mismatch between them), the haircut that applies is:
(a) if the mismatched currencies are both pegged to the same reference currency, or 1 of them is pegged to the other — 0; or
(b) in any other case — 8%.
(4) If there is a currency mismatch between a guarantee and the exposure covered by it, the amount of the exposure that is covered must be reduced using the following formula:

Gx(1 — Hfx)

where:
G is the nominal amount of the guarantee.
Hfx is the haircut appropriate for the currency mismatch between the credit protection and the underlying obligation, as follows:

(a) if the guarantee is revalued every 10 business days — 8%;
(b) if the guarantee is revalued at any longer interval — the factor H calculated using the formula in subrule (5); or
(c) if the mismatched currencies are both pegged to the same reference currency, or if 1 of them is pegged to the other — 0.
(5) If the guarantee is revalued at intervals longer than 10 business days, the 8% haircut must be scaled up using the following formula:



where:
H is the scaled-up haircut.
N is the number of business days between revaluations.
Amended by QFCRA RM/2015-3 (as from 1st January 2016).