Leverage Ratio Framework

Affiliated entities to the bank acting as a CM may be considered a client if it is outside the relevant scope of regulatory consolidation at the level at which the Leverage ratio is applied. In contrast, if an affiliate entity falls within the regulatory scope of consolidation, the trade between the affiliate entity and the CM is eliminated in the course of consolidation but the CM still has a trade exposure to the CCP. In this case, the transaction with the CCP will be considered proprietary and the exemption in paragraph 7.2.5 above will not apply. 7.2.8 In addition to the CCR exposure arising from the fair value of the contracts, written credit derivatives create a notional credit exposure arising from the credit worthiness of the entity. Banks should treat written credit derivatives consistently with cash instruments (e.g. loans, bonds) for the purposes of the Leverage ratio exposure measure. 7.2.9 To capture the credit exposure of a certain entity, taking into consideration the treatment of derivatives and related collateral above, the effective notional amount referenced by a written credit derivative must be included in the Leverage ratio exposure measure. Unless the written credit derivative is included in a transaction cleared on behalf of a client of the bank acting as a CM (or acting as a clearing services provider in a multi-level client structure as referenced in paragraph 7.2.5 and the transaction meets the requirements of paragraph 7.2.5 for the exclusion of trade exposures to the QCCP (or, in the case of a multilevel client structure, the requirements of paragraph 7.2.5 for the exclusion of trade exposures to the CM or the QCCP).