14.2.2.8.1 For Derivatives

This section details the calculation of excess collateral due and excess collateral receivable for derivatives.

Calculation of Excess Collateral Due

The application computes the value of the collateral that a derivative counterparty has posted to the bank, over the contractually required collateral, and therefore can be withdrawn by the counterparty, as follows:

1. If Secured Indicator is No, then the excess collateral due is 0.
2. If Secured Indicator is Y and Gross Exposure are less than or equal to 0, the application computes the excess collateral due as follows:

   Figure 14-13 Formula to calculate the excess collateral due for derivatives

   
   

   

   
   

   Where,

   Adjusted collateral received: Collateral received from the counterparty less customer withdrawable collateral

   Customer withdrawable collateral: Collateral received under re-hypothecation rights that can be contractually withdrawn by the customer within the LCR horizon without a significant penalty associated with such a withdrawal.

3. If Secured Indicator is Y and Gross Exposure are greater than 0, the application computes the excess collateral due as follows:

Figure 14-14 Formula to calculate Excess Collateral Due

The excess collateral due is assumed to be recalled by the counterparty and therefore receives the relevant outflow rate specified by the regulator as part of the pre-configured business assumptions for LCR calculations.

Calculation of Excess Collateral Receivable

The application computes the value of the collateral that the bank has posted to its derivative counterparty, over the contractually required collateral, and therefore can be withdrawn by the bank, as follows:

1. If Secured Indicator is No, then the excess collateral receivable is 0.
2. If Secured Indicator is Y and Gross Exposure are greater than or equal to 0, the application computes the excess collateral receivable as follows:

   Figure 14-15 Formula to calculate the excess collateral receivable for derivatives

   
   

   

   
   

   Where,

   Adjusted collateral posted: Collateral posted by the bank less firm withdrawable collateral.

   Firm withdrawable collateral: Collateral provided under re-hypothecation rights that can be contractually withdrawn by the bank within the LCR horizon without a significant penalty associated with such a withdrawal.

3. If Secured Indicator is Y and Gross Exposure are less than 0, the application computes the excess collateral receivable as follows:

   Figure 14-16 Formula to calculate the excess collateral receivable for derivatives

   
   

   

   
   

   The excess collateral receivable does not receive a pre-specified inflow rate from the regulator and is, therefore, excluded from the LCR calculations. However, the application computes this to report.