Table 1-Conversion Factor Matrix for Calculating Potential Future Credit Exposure1
Original maturity2 | Interest rate | Foreign exchange rate and gold | Equity | Other3 (includes commodities and precious metals except gold) |
1 year or less | .015 | .015 | .20 | .06 |
Over 1 to 3 years | .03 | .03 | .20 | .18 |
Over 3 to 5 years | .06 | .06 | .20 | .30 |
Over 5 to 10 years | .12 | .12 | .20 | .60 |
Over ten years | .30 | .30 | .20 | 1.0 |
1 For an OTC derivative contract with multiple exchanges of principal, the conversion factor is multiplied by the number of remaining payments in the derivative contract.
2 For an OTC derivative contract that is structured such that on specified dates any outstanding exposure is settled and the terms are reset so that the market value of the contract is zero, the remaining maturity equals the time until the next reset date. For an interest rate derivative contract with a remaining maturity of greater than one year that meets these criteria, the minimum conversion factor is 0.005.
3 Transactions not explicitly covered by any other column in the Table are to be treated as "Other."
TABLE 2-Collateral Haircuts
SOVEREIGN ENTITIES | ||
Residual maturity | Haircut without currency mismatch1 | |
OECD Country Risk Classification2 0-1 | [LESS THAN EQUAL TO]1 year | 0.005. |
[GREATER THAN]1 year, [LESS THAN EQUAL TO]5 years | 0.02. | |
[GREATER THAN]5 years | 0.04. | |
OECD Country Risk Classification 2-3 | [LESS THAN EQUAL TO]1 year | 0.01. |
[GREATER THAN]1 year, [LESS THAN EQUAL TO]5 years | 0.03. | |
[GREATER THAN]5 years | 0.06. | |
CORPORATE AND MUNICIPAL BONDS THAT ARE BANK-ELIGIBLE INVESTMENTS | ||
Residual maturity for debt securities | Haircut without currency mismatch | |
All | [LESS THAN EQUAL TO]1 year | 0.02. |
All | [GREATER THAN]1 year, [LESS THAN EQUAL TO]5 years | 0.06. |
All | [GREATER THAN]5 years | 0.12. |
OTHER ELIGIBLE COLLATERAL | ||
Main index3 equities (including convertible bonds) | 0.15. | |
Other publicly-traded equities (including convertible bonds) | 0.25. | |
Mutual funds | Highest haircut applicable to any security in which the fund can invest. | |
Cash collateral held | 0. |
1 In cases where the currency denomination of the collateral differs from the currency denomination of the credit transaction, an additional 8 percent haircut will apply.
2 OECD Country Risk Classification means the country risk classification as defined in Article 25 of the OECD's February 2011 Arrangement on Officially Supported Export Credits Arrangement.
3 Main index means the Standard & Poor's 500 Index, the FTSE All-World Index, and any other index for which the covered company can demonstrate to the satisfaction of the Federal Reserve that the equities represented in the index have comparable liquidity, depth of market, and size of bid-ask spreads as equities in the Standard & Poor's 500 Index and FTSE All-World Index.
12 C.F.R. §32.9