Financial Collateral Simple Method
The risk weight of the collateralised portion shall be at least 20 % except as specified in paragraphs 4 to 6. Institutions shall apply to the remainder of the exposure value the risk weight that they would assign to an unsecured exposure to the counterparty under Chapter 2.
Institutions shall assign a risk weight of 10 %, to the extent of the collateralisation, to the exposure values of such transactions collateralised by debt securities issued by central governments or central banks which are assigned a 0 % risk weight under Chapter 2.
For transactions other than those referred to in paragraphs 4 and 5, institutions may assign a 0 % risk weight where the exposure and the collateral are denominated in the same currency, and either of the following conditions is met:
the collateral is cash on deposit or a cash assimilated instrument;
For the purpose of paragraphs 5 and 6 debt securities issued by central governments or central banks shall include:
debt securities issued by multilateral development banks to which a 0 % risk weight is assigned under or by virtue of Article 117(2);
debt securities issued by international organisations which are assigned a 0 % risk weight under Article 118;