Article 5b
Mark-to-Market Method
1.
The current replacement cost of liabilities arising from derivative contracts at netting set level shall be the absolute value of the net market value of those contracts within the netting, gross of any collateral held or posted where positive and negative market values are netted in computing the net market value. For that purpose, institutions shall treat an individual derivative transaction as its own netting set.
2.
In order to determine the potential future credit exposure, institutions shall multiply the notional amounts or underlying values, as applicable, by the percentages set out in Table 1 and in accordance with the following:
(a)
derivative contracts which do not fall within one of the five categories set out in Table 1 shall be treated as contracts concerning commodities other than precious metals;
(b)
for derivative contracts with multiple exchanges of principal, the percentages shall be multiplied by the number of remaining payments still to be made in accordance with the contract;
(c)
for derivative contracts that are structured to settle outstanding exposure following specified payment dates and where the terms are reset so that the market value of the derivative contract is zero on those specified dates, the residual maturity shall be equal to the time until the next reset date; in the case of interest-rate contracts that meet those criteria and have a remaining maturity of over one year, the percentage shall be no lower than 0,5 %.
Table 1
|
Residual maturity |
Interest-rate contracts |
Contracts concerning foreign-exchange rates and gold |
Contracts concerning equities |
Contracts concerning precious metals other than gold |
Contracts concerning commodities other than precious metals |
|
1 year or less |
0 % |
1 % |
6 % |
7 % |
10 % |
|
Over 1 year, not exceeding 5 years |
0,5 % |
5 % |
8 % |
7 % |
12 % |
|
Over 5 years |
1,5 % |
7,5 % |
10 % |
8 % |
15 % |
|
|
|
|
|
|
|
3.
The exposure value shall be the sum of current replacement cost and potential future credit exposure.