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You are viewing BIPRU 10 Large exposures requirements as it appeared on 31/12/2013. The current version of BIPRU 10 Large exposures requirements was last updated on 31/12/2013.

BIPRU 10.3 Identification of counterparties

01/01/2007R

An individual counterparty may be a natural or legal person.

Identification of counterparties for guaranteed and collateralised exposures

31/12/2010R

  1. (1)

    Where an exposure to a counterparty is:

    1. (a)

      guaranteed by a third party, a firm may treat the portion of the exposure which is guaranteed as having been incurred to the guarantor rather than to the counterparty, provided that the unsecured exposure to the guarantor would be assigned an equal or lower risk weight than a risk weight of the unsecured exposure to the counterparty under the standardised approach; or

    2. (b)

      secured by collateral issued by a third party, a firm may treat the portion of the exposure collateralised by the market value of recognised collateral as having been incurred to the third party rather than to the counterparty, provided that the collateralised portion of the exposure would be assigned an equal or lower risk weight than a risk weight of the unsecured exposure to the counterparty under the standardised approach.

      [Note: BCD Article 117(1)(a) and (b)]

  2. (2)

    In deciding whether or not to treat the exposure as an exposure to the third party a firm must ensure that the identification of counterparties for concentration risk purposes is applied in a consistent manner.

  3. (3)

    [deleted]

  4. (4)

    [deleted]

  5. (5)

    [deleted]

  6. (6)

    A guarantee or collateral may only be treated in accordance with (1) if the firm complies with the eligibility requirements and other minimum requirements set out in BIPRU 5 (Credit risk mitigation) and, if applicable, BIPRU 4.10 (The IRB approach: Credit risk mitigation) for the purposes of calculating risk weighted exposure amounts.

  7. (7)

    For the purpose of this rule, guarantee includes a credit derivative recognised under BIPRU 5 and, if applicable, BIPRU 4.10, other than a credit linked note.

    [Note: BCD Article 112(1)]

31/12/2010G
  1. (1)

    If a firm treats an exposure to a counterparty as guaranteed, or secured by collateral issued, by a third party for the purposes of BIPRU 5 (Credit risk mitigation), it should apply the same approach on a consistent basis when identifying a counterparty for the purposes of this chapter.

  2. (2)

    An example of the eligibility requirements and other minimum requirements set out in BIPRU 5 as referred to in BIPRU 10.3.3 R (6) is the requirement for a legal review in BIPRU 5.2.3 R.

  3. (3)

    Where the guarantee is denominated in a currency different from that in which the exposure is denominated, the provisions on the treatment of currency mismatch for unfunded credit protection in BIPRU 5.7 (Unfunded credit protection) and, if applicable, BIPRU 4.10 (The IRB approach: Credit risk mitigation) are applicable for the calculation of the amount of the exposure deemed to be covered.

    [Note: BCD Article 117(2)(a)]

  4. (4)

    Where there is a mismatch between the maturity of the exposure and the maturity of the protection provided by guarantee, BIPRU 5.8 (Maturity mismatches) and, if applicable, BIPRU 4.10 (The IRB approach: Credit risk mitigation) are applicable for the treatment for mismatch.

    [Note: BCD Article 117(2)(b)]

  5. (5)

    For the purpose of BIPRU 10.3.3R (1), where there is a mismatch between the maturity of the exposure and the maturity of the protection provided by collateral, BIPRU 5.8.7 R (Valuation of protection: Transactions subject to funded credit protection - financial collateral simple method) requires that the collateral must not be recognised.

    [Note: BCD Article 117(1) second paragraph]

  6. (6)

    In relation to a guarantee, BIPRU 5.7 (Unfunded credit protection) and, if applicable, BIPRU 4.10 (The IRB approach: Credit risk mitigation) are applicable for the treatment of partial coverage.

    [Note: BCD Article 117(2)(c)]

Point In Time
31/12/2013
10/06/2013
01/04/2013
02/11/2012
01/08/2011
06/04/2011
31/12/2010
30/12/2010
29/06/2007
06/04/2007
01/01/2007