20. Counterparty Credit Risk

Template CCR8 - Exposures to central counterparties Table CCRA: Qualitative disclosure related to CCR Purpose : Describe the main characteristics of counterparty credit risk management (eg operating limits, use of guarantees and other credit risk mitigation (CRM) techniques, impacts of own credit downgrading). Scope of application: The table is mandatory for all banks. Content: Qualitative information. Frequency : Annual. Format : Flexible. Banks must provide risk management objectives and policies related to counterparty credit risk, including: (a) The method used to assign the operating limits defined in terms of internal capital for counterparty credit exposures and for CCP exposures; (b) Policies relating to guarantees and other risk mitigants and assessments concerning counterparty risk, including exposures towards CCPs; (c) Policies with respect to wrong-way risk exposures; (d) The impact in terms of the amount of collateral that the bank would be required to provide given a credit rating downgrade. Template CCR1: Analysis of CCR exposures by approach Purpose: Provide a comprehensive view of the methods used to calculate counterparty credit risk regulatory requirements and the main parameters used within each method. Scope of application: The template is mandatory for all banks. Content: Regulatory exposures, RWA and parameters used for RWA calculations for all exposures subject to the counterparty credit risk framework (excluding CVA charges or exposures cleared through a CCP). Frequency : Semiannual. Format: Fixed. Accompanying narrative : Banks are expected to supplement the template with a narrative commentary to explain any significant changes over the reporting period and the key drivers of such changes. a b c d e f Replacement cost Potential future exposure Effective EPE Alpha used for computing regulatory EAD EAD post- CRM RWA 1 SA-CCR (for derivatives) 1.4 2 Internal Model Method (for derivatives and SFTs) 3 Simple Approach for credit risk mitigation (for SFTs) 4 Comprehensive Approach for credit risk mitigation (for SFTs) 5 Value-at-risk (VaR) for SFTs 6 Total Definitions SA-CCR (for derivatives): Banks should report SA-CCR in row 1. Replacement Cost (RC): For trades that are not subject to margining requirements, the RC is the loss that would occur if a counterparty were to default and was closed out of its transactions immediately. For margined trades, it is the loss that would occur if a counterparty were to default at present or at a future date, assuming that the closeout and replacement of transactions occur instantaneously. However, closeout of a trade upon a counterparty default may not be instantaneous. The replacement cost under the standardised approach for measuring counterparty credit risk exposures is described in SCCR6. Potential Future Exposure is any potential increase in exposure between the present and up to the end of the margin period of risk. The potential future exposure for the standardised approach is described in SCCR3 . Effective Expected Positive Exposure (EPE) is the weighted average over time of the effective expected exposure over the first year, or, if all the contracts in the netting set mature before one year, over the time period of the longest-maturity contract in the netting set where the weights are the proportion that an individual expected exposure represents of the entire time interval (see SCCR3 ). EAD post-CRM: exposure at default. This refers to the amount relevant for the capital requirements calculation having applied CRM techniques, credit valuation adjustments according to SCCR5.10 and specific wrong-way adjustments (see SCCR7 ). Template CCR3: Standardised approach - CCR exposures by regulatory portfolio and risk weights Purpose : Provide a breakdown of counterparty credit risk exposures calculated according to the standardised approach: by portfolio (type of counterparties) and by risk weight (riskiness attributed according to standardised approach). Scope of ap