8.2.2 Encumbrance

This is a generic assumption which can be defined and caters to the different combinations available as part of rating downgrade and valuation changes of collateral.

See Defining a New Business Assumption, for information on the steps involved in specifying this assumption.

The steps involved in applying the delay in cash flow timing assumption to cash flows, are:

1. Identify the original time bucket and calculate the cash outflow occurring in it due to the assumption.
2. Identify the corresponding revised time buckets and the cash inflow occurring in it, including penalties, if any.
3. If time specific or critical obligation, record the delay and indicate a breach.