Financial Markets Act, 2012 (Act No. 19 of 2012)

Regulations

Financial Markets Act Regulations

Chapter VI : Central Counterparties

27. Capital calculation requirements for credit risk

27.3 Exposures to qualifying central counterparties

Purchase cart Previous page Return to chapter overview Next page

 

(1)Any asset or collateral posted or provided must, from the perspective of the central counterparty posting or providing such collateral, be assigned the relevant risk weight that otherwise applies to such asset or collateral in terms of the relevant requirements specified in these Regulations, regardless of the fact that such asset has been posted or provided as collateral, provided that—
(a)when an asset or collateral of a clearing member or client is posted with or provided to a qualifying central counterparty, and the asset or collateral is not held in an insolvency remote manner, the central counterparty posting or providing such asset or collateral must also recognise the related credit risk, based upon the asset or collateral being exposed to risk of loss that is based on the creditworthiness of the entity or person holding such asset or collateral, provided that—
(i)when the entity or person holding such asset or collateral is the qualifying central counterparty, a risk weight of 2% applies to collateral included in the definition of trade exposure;
(ii)the relevant risk weight of the qualifying central counterparty applies to assets or collateral posted or provided for any purpose other than the situation provided for in subparagraph (i);
(b)collateral posted or provided by the central counterparty, including cash, securities, other pledged assets, and excess initial or variation margin, which is often being referred to as over-collateralisation, that is held by a custodian, and is insolvency remote from the relevant qualifying central counterparty, may not be subject to a capital requirement for counterparty credit risk exposure to such insolvency remote custodian, and for purposes of this Regulation.