Related provisions for BIPRU 3.5.4

Credit quality step

1

2

3

4

5

6

Risk weight

0 %

20 %

50 %

100 %

100 %

150 %

Credit quality step to which central government is assigned

1

2

3

4

5

6

Risk weight of exposure

20%

50%

100%

100%

100%

150%

Credit quality step

1

2

3

4

5

6

Risk weight

20%

50%

50%

100%

100%

150%

Credit quality step

1

2

3

4

5

6

Risk weight

20%

20%

20%

50%

50%

150%

Credit quality step

1

2

3

4

5

6

Risk weight

20%

50%

100%

100%

150%

150%

Credit quality step

1

2

3

4

5

6

Risk weight

20%

50%

100%

100%

150%

150%

Transaction with linear risk profile except for debt instruments.

The effective notional value (market price multiplied by quantity) of the underlying financial instruments (including commodities) converted to the firm's domestic currency.

Debt instruments and payment legs.

The effective notional value of the outstanding gross payments (including the notional amount) converted to the firm'sbase currency, multiplied by the modified duration of the debt instrument, or payment leg, respectively.

Credit default swap

The notional value of the reference debt instrument multiplied by the remaining maturity of the credit default swap.

Subject to BIPRU 13.5.9 R to BIPRU 13.5.10 R, financial derivative instrument with a non-linear risk profile, including options and swaptions except in the case of an underlying debt instrument.

Equal to the delta equivalent effective notional value of the financial instrument that underlies the transaction.

Subject to BIPRU 13.5.9 R to BIPRU 13.5.10 R, financial derivative instrument with a non-linear risk profile, including options and swaptions, of which the underlying is a debt instrument or a payment leg.

Equal to the delta equivalent effective notional value of the financial instrument or payment leg multiplied by the modified duration of the debt instrument, or payment leg, respectively.

Maturity

<= 1 year

<= 1 year

Maturity

>1 <= 5 years

>1 <= 5 years

Maturity

> 5 years

> 5 years

(1)

Interest Rates

0.2%

(2)

Interest Rates for risk positions from a reference debt instrument that underlies a credit default swap and to which a capital charge of 1.60%, or less, applies under BIPRU 7.2.44 R1.

0.3%

(3)

Interest Rates for risk positions from a debt instrument or reference debt instrument to which a capital charge of more than 1.60% applies under BIPRU 7.2.44 R.

0.6%

(4)

Exchange Rates

2.5%

(5)

Electric power

4.0%

(6)

Gold

5.0%

(7)

Equity

7.0%

(8)

Precious Metals (except gold)

8.5%

(9)

Other commodities (excluding precious metals and electricity power)

10.0%

(10)

Underlying instruments of financial derivative instruments that are not in any of the above categories.

10.0%

Equity

The PRA applicable to the underlying equity or equity index in the table in BIPRU 7.3.30R (Simplified equity method)

Interest rate

The sum of the specific risk PRA (see BIPRU 7.2.43R to BIPRU 7.2.51G (Specific risk calculation)) and the general market risk PRA (as set out in BIPRU 7.2.57R (General market risk PRAs)) applicable to the underlying position

Debt securities

The sum of the specific risk PRA (see BIPRU 7.2.43R to BIPRU 7.2.51G (Specific risk calculation)) and the general market risk PRA (as set out in the table in BIPRU 7.2.57R (General market risk PRAs)) applicable to the underlying position

Commodity

18% (unless BIPRU 7.6.7R requires otherwise)

Currency

8%

Gold

8%

CIU

32% (subject to BIPRU 7.6.6R and BIPRU 7.6.7R)

Equity

Option (warrant) on a single equity or option on a future/forward on a single equity

A notional position in the actual equity underlying the contract valued at the current market price of the equity.

Option (warrant) on a basket of equities or option on a future/forward on a basket of equities

A notional position in the actual equities underlying the contract valued at the current market price of the equities.

Option (warrant) on an equity index or option on a future/forward on an equity index

A notional position in the index underlying the contract valued at the current market price of the index.

Interest rate

Option on an interest rate or an interest rate future/FRA

A zero coupon zero-specific-risk security in the currency concerned with a maturity equal to the sum of the time to expiry of the contract and the length of the period on which the settlement amount of the contract is calculated valued at the notional amount of the contract.

Option on an interest rate swap

A zero coupon zero-specific-risk security in the currency concerned with a maturity equal to the length of the swap valued at the notional principal amount.

Interest rate cap or floor

A zero coupon zero-specific-risk security in the currency concerned with a maturity equal to the remaining period of the cap or floor valued at the notional amount of the contract.

Debt securities

Option (warrant) on a debt security or option on a future/forward on a debt security

The underlying debt security with a maturity equal to the time to expiry of the option valued as the nominal amount underlying the contract at the current market price of the debt security.

Option (warrant) on a basket of debt securities or option on a future/forward on a basket of debt securities

A notional position in the actual debt securities underlying the contract valued at the current market price of the debt securities.

Option (warrant) on an index of debt securities or option on a future/forward on an index of debt securities

A notional position in the index underlying the contract valued at the current market price of the index.

Commodity

Option on a commodity or option on a future/forward on a commodity

An amount equal to the tonnage, barrels or kilos underlying the option with (in the case of a future/forward on a commodity) a maturity equal to the expiry date of the forward or Futures contract underlying the option. In the case of an option on a commodity the maturity of the position falls into Band 1 in the table in BIPRU 7.4.28R (Table: Maturity bands for the maturity ladder approach).

Option on a commodityswap

An amount equal to the tonnage, barrels or kilos underlying the option with a maturity equal to the length of the swap valued at the notional principal amount.

CIU

(These provisions about CIUs are subject to BIPRU 7.6.35R)

Option (warrant) on a single CIU or option on a future/forward on a single CIU

A notional position in the actual CIU underlying the contract valued at the current market price of the CIU.

Option (warrant) on a basket of CIUs or option on a future/forward on a basket of CIUs

A notional position in the actual CIUs underlying the contract valued at the current market price of the CIUs.

Gold

Option on gold or option on a future/forward on gold

An amount equal to the troy ounces underlying the option with (in the case of a future/forward on gold) a maturity equal to the expiry date of the forward or futures contract underlying the option.

Currency

Currency option

The amount of the underlying currency that the firm will receive if the option is exercised converted at the spot rate into the currency that the firm will sell if the option is exercised.

Option or warrantposition

In the money by more than the PRA

In the money by less than the PRA

Out of the money or at the money

Long in security or gold

Long put

Zero

Wp

X

Short call

Y

Y

Z

Short in security or gold

Long call

Zero

Wc

X

Short put

Y

Y

Z

Where:

Wp means

{(PRA-100%) x The underlying position valued at strike price}

+

The market value of the underlying position

Wc means

{(100% +PRA x The underlying position valued at strike price}

-

The market value of the underlying position

X means

The market value of the underlying position multiplied by the appropriate PRA

Y means

The market value of the underlying position multiplied by the appropriate PRA. This result may be reduced by the market value of the option or warrant, subject to a maximum reduction to zero.

Z means

The option hedging method is not permitted; the option standard method must be used.

Single equities

12%

Qualifying equity indices (see BIPRU 7.3.38R)

8%

All other equity indices or baskets

12%

If it is necessary to distinguish between the specific risk PRA and the general market risk PRA, the specific risk PRA for the first and third rows is 4% and that for the second row is 0%. The rest of the PRA in the second column is the general market risk PRA.

Qualifying equities

2%

Qualifying equity indices (see BIPRU 7.3.38R)

0%

All other equities, equity indices or equities baskets

4%

Less than 2.5 years

0%

0.4%

2.8%

8%

50%

Equal or more than 2.5 years

0.4%

0.8%

2.8%

8%

50%

The coverage of each of the categories is set out in BIPRU 4.5.6 R

Correlation (R)

0.03 × (1 - EXP(-35*PD))/(1-EXP(-35)) + 0.16*

[1-(1-EXP(-35*PD))/(1-EXP(-35))]

Risk weight (RW)

(LGD*N[(1-R)^-0.5*G(PD)+(R/(1-R))^0.5 *G(0.999)]-PD*LGD)* 12.5*1.06

N(x)

denotes the cumulative distribution function for a standard normal random variable (i.e. the probability that a normal random variable with mean zero and variance of one is less than or equal to x).

G(z)

denotes the inverse cumulative distribution function for a standard normal random variable (i.e. the value x such that N(x) = z).

PD = 1

For PD = 1 (defaultedexposure), RW must be:

Max {0, 12.5 *(LGD- EL_BE)}

where EL_BEmust be the firm's best estimate of expected loss for the defaultedexposure according to BIPRU 4.3.122 R.

Risk weighted exposure amount

equals RW*exposure value

Consolidated requirement component

Rules on which the consolidated requirement component are based (the applicable risk capital requirement)

Consolidated credit risk requirement

Credit risk capital requirement

Consolidated fixed overheads requirement

Fixed overheads requirement

Consolidated market risk requirement

Market risk capital requirement

Consolidated operational risk requirement

Operational risk capital requirement

A

B

C

CQS 1

7%

12%

20%

CQS 2

8%

15%

25%

CQS 3

10%

18%

35%

CQS 4

12%

20%

CQS 5

20%

35%

CQS 6

35%

50%

CQS 7

60%

75%

CQS 8

100%

CQS 9

250%

CQS 10

425%

CQS 11

650%

Below CQS 11

1250%