Financial Services (Investment and Fiduciary Services)
Repealed Subsidiary 2007/002
FINANCIAL SERVICES (CAPITAL ADEQUACY OF INVESTMENT FIRMS) REGULATIONS 2007 event payment is lower than the capital requirement under the method in the first sentence of this paragraph, this amount may be taken as the capital requirement for specific risk.
Where an n-th-to-default credit derivative is externally rated, the protection seller shall calculate the specific risk capital charge using the rating of the derivative and apply the respective securitisation risk weights as applicable.
B. TREATMENT OF THE PROTECTION BUYER
positions are determined as the mirror principle of the protection seller, with the exception of a credit linked note (which entails no short position in the issuer). If at a given moment there is a call option in combination with a step- up, such moment is treated as the maturity of the protection. In the case of
first-to-default credit derivatives and nth-to-default credit following treatment applies instead of the mirror principle.
First-to-default credit derivatives
firm obtains credit
protection for a number of
reference entities underlying a credit derivative under the terms that the first default among the assets shall trigger payment and that this credit event shall
firm may offset
specific risk percentage charge among
Nth-to-default credit derivatives
exposures triggers payment
the credit protection, the protection buyer may only offset specific risk if protection has also been obtained for defaults 1 to n-1 or when n-1 defaults have already occurred. In such cases, the methodology set out above for first-to-default credit derivatives shall be followed appropriately modified for
Table 1 of paragraph 14 of Schedule 1 is amended as follows−
in the first column of the second row, substituted by “paragraph 29” and “step 1 by “step 1, 2 or 3”;
“paragraph 28” is or 2” is substituted