Unformatted text preview: f fully secured ((i) Land and building which are valued by an expert valuer and where the valuation is not more than three years old, and (ii) Plant and machinery in good working condition at a value not higher than the depreciated value as reflected in the audited balance sheet of the borrower, which is not older than eighteen months.
02/23/13 Capital Adequacy Framework 29 Off-Balance Sheet Items
Off-Balance The total risk weighted offbalance sheet credit exposure is calculated as the sum of the riskweighted amount of the market related and nonmarket related offbalance sheet items. The risk
weighted amount of an offbalance sheet item that gives rise to credit exposure is generally calculated by means of a twostep process:
(a) the notional amount of the transaction is converted into a credit equivalent amount, by multiplying the amount by the specified credit conversion factor or by applying the current exposure method, and
(b) the resulting credit equivalent amount is multiplied by the risk weight applicable to the counterparty or to the purpose for which the bank has extended finance or the type of asset, whichever is higher. 02/23/13 Capital Adequacy Framework 30 Risk Weighted Securitisation Exposures
Risk i) Banks shall calculate the risk weighted amount of an onbalance sheet securitisation exposure by multiplying the principal amount (after deduction of specific provisions) of
the exposures by the applicable risk weight.
ii) The riskweighted asset amount of a securitisation exposure is computed by multiplying the amount of the exposure by the appropriate risk weight determined in accordance with issue specific rating assigned to those exposures by the chosen external credit rating agencies as indicated in the following tables:
Domestic rating agencies AAA AA A BBB BB B or below or unrated RW for banks 20 30 50 100 350 Deduction 30 50 100 Deductions other than originators (%) RW originator (%)
02/23/13 20 Capital Adequacy Framework 31 External Credit Assessments:
Eligible Credit Rating Agencies In accordance with the principles laid down in the Revised Framework, the Reserve Bank of India has decided that banks may use the ratings of the following domestic credit rating agencies (arranged in alphabetical order) for the purposes of risk weighting
their claims for capital adequacy purposes:
a) Credit Analysis and Research Limited;
b) CRISIL Limited;
c) FITCH India; and
d) ICRA Limited.
The Reserve Bank of India has decided that banks may use the ratings of the following international credit rating agencies (arranged in alphabetical order) for the purposes of risk weighting their claims for capital adequacy purposes where specified:
b. Moodys; and
Capital Adequacy Framework
c. Standard & Poor’s Credit Risk Mitigation
Credit 02/23/13 Simple & comprehensive approaches
Legal certainty, robust recovery procedures
Effects of CRM not to be double counted
Should not result in increasing other risks
Haircuts to be used in the comprehensive approach Capital Adequacy Framework 33 Eligible financial collateral
View Full Document
This note was uploaded on 02/23/2013 for the course BANKING 101 taught by Professor Mehta during the Spring '13 term at Albany State University.
- Spring '13