MORNBFI Vol. 1 - Planters Development Bank

APP. Q-4611.12.31and exposure set at 8% (based on a10-business day holding period anddaily marking to market)37. The treatment of transactionswhere there is a maturity mismatchbetween the maturity of the counterpartyexposure and the collateral is given inparagraphs 50 to 54.38. These are the haircuts to be used(based on a 10-business day holdingperiod, daily marking to market anddaily remargining), expressed aspercentages:HaircutSovereign Other(and PSEs Issuerstreated asIssue rating for Residual sovereign)debt securities 1 maturity and MDB(with 0%risk weight)issuersPhp – denomi- 1 yr. to < 5 yrs. 2Philippine NGand BSP> 5 years 41 yr. to < 5 yrs. 2 4> 5 years 4 8A+ to BBB-/ 1 yr. to < 5 yrs. 3 6debt securitiesas defined in> 5 years 6 12paragraph 34.fEquities inclu- 15ded in the mainindex and goldUITF and ABF2 Highest haircutapplicable to anysecurity in whichthe fund can investCash per parag- 0raph 34.a in thesame currencyOther financial 25instruments inthe tradingbook (appliesto repo-styletransactionsin the tradingbook only)39. Where the collateral is a basket ofassets, the haircut on the basket will beH =Sa i H i , where a i is the weight of theasset in the basket and H i is the haircutapplicable to that asset.40. For collateralized OTC derivativestransactions in the trading book, the creditequivalent amount will be computedaccording to paragraphs 18 to 19, butadjusted by deducting the volatility adjustedcollateral amount as computed accordingto paragraphs 36 to 39.41. The exposure amount after riskmitigation will be multiplied by the riskweight of the counterparty to obtain the riskweightedasset amount for the collateralizedtransaction.Guarantees42. Where guarantees are direct,explicit, irrevocable and unconditional,banks may be allowed to take account ofsuch credit protection in calculating capitalrequirements.43. A guarantee must represent a directclaim on the protection provider and mustbe explicitly referenced to specificexposures or a pool of exposures, so thatthe extent of the cover is clearly defined andincontrovertible.Other than non- paymentby a protection purchaser of money due inrespect of the credit protection contract, theguarantee must be irrevocable; there mustbe no clause in the contract that wouldallow the protection provider unilaterally tocancel the credit cover or that wouldincrease the effective cost of cover as a resultof deteriorating credit quality in the hedgedexposure. It must also be unconditional;there should be no clause in the protectioncontract outside the direct control of thebank that could prevent the protectionprovider from being obliged to pay out in atimely manner in the event that the originalcounterparty fails to make the payment(s) due.44. In addition to the legal certaintyrequirement in paragraph 22, in order for a1The notations follow the rating symbols used by Standard & Poor's. The mapping of ratings of all recognized external ratingagencies is in Part III.CManual of Regulations for Non-Bank Financial InstitutionsQ RegulationsAppendix Q-46 - Page 17