Financial Services (Investment and Fiduciary Services)
FINANCIAL SERVICES (CAPITAL ADEQUACY OF INVESTMENT
FIRMS) REGULATIONS 2007 with the higher capital charge, while the specific risk requirements on the other side shall be zero.
45. Partial allowance shall be given when the value of two legs usually move in the opposite direction. This would be the case in the following situations–
the position falls under paragraph 43(b) but there is an asset mismatch between the reference obligation and the underlying exposure. However, the positions meet the following requirements–
the reference obligation ranks pari passu with or is junior
to the underlying obligation; and
the underlying obligation and reference obligation share the same obligor and have legally enforceable cross default or cross acceleration clauses;
the position falls under paragraph 43(a) or 44 but there is a currency or maturity mismatch between the credit protection and the underlying asset (currency mismatches should be included in the normal reporting foreign exchange risk under Schedule 3); or
the position falls under paragraph 44 but there is an asset mismatch between the cash position and the credit derivative. The underlying asset is included in the (deliverable) obligations in the credit derivative documentation.
In each of those situations, rather than adding the specific risk capital requirements for each side of the transaction, only the higher of the two capital requirements shall apply.
46. In all situations not falling under paragraphs 43 to 45, a specific risk capital charge shall be assessed against both sides of the positions.
Capital charges for Collective Investment Undertakings in the trading book.
The capital requirements for positions in Collective Investment
a trading book methods set out
capital treatment shall be in paragraphs 48 to 56.
48. Without prejudice to other provisions in this section, positions in CIUs shall be subject to a capital requirement for position risk (specific and
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Repealed Subsidiary 2007/002