Document ID: chunk:federal_register_of_legislation:F2024L01518:body:0:p19
Version: federal_register_of_legislation:F2024L01518
Segment Type: other
Provision Reference: 
Character Range: 50538–53399

measure, an ADI must apply the specific treatment set out in paragraphs 38 to 45 of this Attachment to any SFT exposures.[25]

ADI acting as a principal
 1.          When an ADI is acting as a principal in an SFT, its exposure measure must include the sum of the following amounts:
         1.           gross SFT assets recognised for accounting purposes[26] (i.e. with no recognition of accounting netting), adjusted as follows:
                 1.             excluding the value of any securities received under an SFT, where the ADI has recognised the securities as an asset on its balance sheet; and
                 2.          cash payables and cash receivables in SFTs with the same counterparty may be measured net if all the following criteria are met:
                         1.         transactions have the same explicit final settlement date. Transactions with no explicit end date but which can be unwound at any time by either party to the transaction are not eligible;
                         2.         the right to set-off the amount owed to the counterparty with the amount owed by the counterparty is legally enforceable both in the normal course of business and in the event of the default, insolvency or bankruptcy of the counterparty; and
                         3.         the counterparties intend to settle net, settle simultaneously, or the transactions are subject to a settlement mechanism that results in the functional equivalent of net settlement.[27] If there is a failure of the securities leg of a transaction at the end of the window for settlement in the settlement mechanism, then this transaction and its matching cash leg must be split out from the netting set and treated gross; and
         2.           a measure of counterparty credit risk calculated as the current exposure without a PFE add-on, calculated as follows:
                 1.             where a qualifying MNA as defined in paragraphs 40 and 41 of this Attachment is in place, the current exposure (E*) must be set to the greater of zero and the total fair value of securities and cash lent to a counterparty for all transactions included in the qualifying MNA (∑Ei) less the total fair value of cash and securities received from the counterparty for those transactions (∑Ci). This is illustrated in the following formula:
E* = max {0, [∑Ei  - ∑Ci]}
 1.          where no qualifying MNA is in place, the current exposure for transactions with a counterparty must be calculated on a transaction by transaction basis; that is, each transaction i is treated as its own netting set, as shown in the following formula:
Ei* = max {0, [Ei – Ci]}
Ei* may be set to zero if:
 1.         Ei is the cash lent to a counterparty;
 2.         this transaction is treated as its own netting set; and
 3.         the associated cash receivable is not eligible for