Texas Register, Volume 38, Number 35, Pages 5587-5800, August 30, 2013 Page: 5,620
5587-5800 p. ; 28 cm.View a full description of this periodical.
Extracted Text
The following text was automatically extracted from the image on this page using optical character recognition software:
the bank has provided notice of its use, or after the commissioner has
approved the use of an alternate model, must be approved by the com-
missioner before a bank may use the revised model for purposes of this
section.
(iv) Net credit exposure. A bank that calculates its
credit exposure by using the [internal] model method pursuant to this
subparagraph may net credit exposures of derivative transactions aris-
ing under the same qualifying master netting agreement.
(B) Conversion factor matrix method. The credit expo-
sure arising from a derivative transaction under the conversion factor
matrix method is [shall] equal to and will remain fixed at the potential
future credit exposure of the derivative transaction, which equals the
product of the notional amount of the derivative transaction and a fixed
multiplicative factor determined by reference to Table 1 of this section
[as determined at the execution f the transation by reference to the
following Table ].
Figure: 7 TAC 12.12(b)(1)(B) (No change.)
(C) Current exposure method. The credit exposure aris-
ing from a derivative transaction (other than a credit derivative trans-
action) under the current exposure method is calculated in the man-
ner provided by 32(c)(5), (6) and (7) of the federal capital adequacy
guidelines. [Remaining maturity metho The credit exposure aris-
ing from a derivative transaction under the remaining maturity method
shall equal the greater of zere or the sum of the current mark-to-market
vatue of the derivative transaction added to the product of the notional
amount of the transaction the remaining maturity in years of the trans-
actio and a fixed multiplicative factor determined by reference to the
following Table 27.]
[Figure 7 TAG - 1-2 r A r,25 b
(2) Credit derivatives.
(A) Counterparty exposure.
_ General rule. Notwithstanding paragraph (1) of
this subsection and subject to clause (ii) of this subparagraph, a state
bank that uses the conversion factor matrix method or the current ex-
posure [remaining maturity] method, or that uses the [internal] model
method without entering an effective margining arrangement as defined
in 12.2 of this title (relating to Definitions), shall calculate the coun-
terparty credit exposure arising from credit derivatives entered by the
bank by adding the net notional value of all protection purchased from
the counterparty on each reference entity.
(ii) Special rule for certain effective margining
arrangements. A bank must add the effective margining arrangement
threshold amount to the counterparty credit exposure arising from
credit derivatives calculated under the model method. The effective
margining arrangement threshold is the amount under an effective
margining arrangement with respect to which the counterparty is not
required to post variation margin to fully collateralize the amount of
the bank's net credit exposure to the counterparty.
(B) Reference entity exposure. A state bank shall calcu-
late the credit exposure to a reference entity arising from credit deriva-
tives entered into by the bank by adding the net notional value of all
protection sold on the reference entity. A [owe ver, the] bank may
reduce its exposure to a reference entity by the amount of any eligi-
ble credit derivative purchased on that reference entity from an eligible
protection provider.
(3) Special rule for central counterparties. In addition to
amounts calculated under paragraphs (1) and (2) of this subsection, the
measure of counterparty exposure to a central counterparty must also
include the sum of the initial margin posted by the bank plus any con-
tributions made by it to a guaranty fund at the time such contribution ismade. However, this requirement does not apply to a bank that uses an
internal model pursuant to paragraph (1)(A) of this subsection if such
model reflects the initial margin and any contributions to a guaranty
fund.
(4) [(-3)] Mandatory or alternative use of method. The
commissioner may in the exercise of discretion require or permit a state
bank to use a specific [the internal model] method or methods set forth
in [paragraph ( 1-)A) f this ssetio the conversion fao er matrix
method set fort in paragraph ( of this subseetio or the remain-
ng maturity method et forth in paragraph (1)() of] this subsection
to calculate the credit exposure arising from all derivative transactions,
from any category of derivative transactions, or from a specific deriva-
tives transaction if the commissioner in the exercise of discretion finds
that such method is consistent with [necessary to promote] the safety
and soundness of the bank.
(c) Securities financing transactions.
(1) In general. Except as provided by paragraph (2) of this
subsection, a state bank shall calculate the credit exposure arising from
a securities financing transaction by one of the following methods. A
state bank shall use the same method for calculating credit exposure
arising from all of its securities financing transactions.
(A) Model [Internal model] method. A state bank may
calculate the credit exposure of a securities financing transaction by
using an internal model that has been approved in writing for purposes
of 32(b) [-32(t)] of the federal capital adequacy guidelines, provided
that the bank notifies the commissioner prior to its use for purposes of
this section, or another [approved] model approved by the department
based on the views of the bank's primary federal banking regulatory
agency and any third party testing and evaluation reports submitted to
the commissioner. Any substantive revisions to an internal model made
after the bank has provided notice of its use, or after the commissioner
has approved the use of an alternate model, must be approved by the
commissioner before a bank may use the revised model for purposes
of this section.
(B) Basic [Non-model] method. A state bank may cal-
culate the credit exposure of a securities financing transaction as fol-
lows:
(i) (No change.)
(ii) Securities lending.
(I) (No change.)
(II) Non-cash collateral transactions. The credit
exposure arising from a securities lending transaction where the col-
lateral is other securities shall equal and remain fixed as the product
of the higher of the two haircuts associated with the two securities, as
determined by reference to Table 2 of this section [in the following Ta-
ble 3], and the higher of the two par values of the securities. Where
more than one security is provided as collateral, the applicable haircut
is the higher of the haircut associated with the security lent and the no-
tional-weighted average of the haircuts associated with the securities
provided as collateral.
(iii) Reverse repurchase agreements. The credit ex-
posure arising from a reverse repurchase agreement shall equal and re-
main fixed as the product of the haircut associated with the collateral
received, as determined by reference to Table 2 of this section [in the
fellowin-g Tale 3], and the amount of cash transferred.
(iv) Securities borrowing.
(I) Cash collateral transactions. The credit expo-
sure arising from a securities borrowed transaction where the collateral38 TexReg 5620 August 30, 2013 Texas Register
Upcoming Pages
Here’s what’s next.
Search Inside
This issue can be searched. Note: Results may vary based on the legibility of text within the document.
Tools / Downloads
Get a copy of this page or view the extracted text.
Citing and Sharing
Basic information for referencing this web page. We also provide extended guidance on usage rights, references, copying or embedding.
Reference the current page of this Periodical.
Texas. Secretary of State. Texas Register, Volume 38, Number 35, Pages 5587-5800, August 30, 2013, periodical, August 30, 2013; Austin, Texas. (https://texashistory.unt.edu/ark:/67531/metapth342086/m1/34/: accessed April 28, 2024), University of North Texas Libraries, The Portal to Texas History, https://texashistory.unt.edu; crediting UNT Libraries Government Documents Department.