Related provisions for BIPRU 4.5.13

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%

20%

20%

50%

50%

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.

2Nth to default credit default swap

The effective notional value of the reference debt instrument, multiplied by the modified duration of the nth to default derivative with respect to a change in the credit spread of the reference debt instrument.

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)

Reference debt instruments of an nth to default derivative that have a credit assessment from a recognised ECAI equivalent to credit quality step 1 to 32

0.3%2

2(11)

Reference debt instruments of an nth to default derivative that do not have a credit assessment from a recognised ECAI equivalent to credit quality step 1 to 3

0.6%

2(12)

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

10.0%

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

1

1

7%

12%

20%

20%

30%

2

8%

15%

25%

25%

40%

3

10%

18%

35%

35%

50%

4

2

12%

20%

40%

65%

5

20%

35%

60%

100%

6

35%

50%

100%

150%

7

3

60%

75%

150%

225%

8

100%

200%

350%

9

250%

300%

500%

10

425%

500%

650%

11

650%

750%

850%

all other, unrated

1250%

Full risk

Guarantees having the character of credit substitutes

Credit derivatives

Acceptances

Endorsements on bills not bearing the name of another credit institution

Transactions with recourse

Irrevocable standby letters of credit having the character of credit substitutes

Assets purchased under outright forward purchase agreements

Forward deposits

The unpaid portion of partly-paid shares and securities

Asset sale and repurchase agreements as defined in Article 12(3) and (5) of the Bank Accounts Directive

Other items also carrying full risk

100%

Medium risk

Documentary credits issued and confirmed (see also medium/low risk).

Warranties and indemnities (including tender, performance, customs and tax bonds) and guarantees not having the character of credit substitutes.

Irrevocable standby letters of credit not having the character of credit substitutes.

Undrawn credit facilities (agreements to lend, purchase securities, provide guarantees or acceptance facilities) with an original maturity of more than one year.

Note issuance facilities (NIFs) and revolving underwriting facilities (RUFs).

50%

Medium/low risk

Documentary credits in which underlying shipment acts as collateral and other self-liquidating transactions.

Undrawn credit facilities (agreements to lend, purchase securities, provide guarantees or acceptance facilities) with an original maturity of up to and including one year which may not be cancelled unconditionally at any time without notice or that do not effectively provide for automatic cancellation due to deterioration in a borrower's creditworthiness.

20%

Low risk

Undrawn credit facilities (agreements to lend, purchase securities, provide guarantees or acceptance facilities) which may be cancelled unconditionally at any time without notice, or that do effectively provide for automatic cancellation due to deterioration in a borrower's creditworthiness. Retail credit lines may be considered as unconditionally cancellable if the terms permit the firm to cancel them to the full extent allowable under consumer protection and related legislation.

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