Guarantees and credit derivatives: double default treatment.

CFR · 2024-01-01 · US · Title 12

(a) (1) The hedged exposure is fully covered or covered on a pro rata basis by: (i) An eligible guarantee issued by an eligible double default guarantor; or (ii) An eligible credit derivative that meets the requirements of § 217.134(b)(2) and that is issued by an eligible double default guarantor. (2) The guarantee or credit derivative is: (i) An uncollateralized guarantee or uncollateralized credit derivative (for example, a credit default swap) that provides protection with respect to a single reference obligor; or (ii) An n (3) The hedged exposure is a wholesale exposure (other than a sovereign exposure). (4) The obligor of the hedged exposure is not: (i) An eligible double default guarantor or an affiliate of an eligible double default guarantor; or (ii) An affiliate of the guarantor. (5) The Board-regulated institution does not recognize any credit risk mitigation benefits of the guarantee or credit derivative for the hedged exposure other than through application of the double default treatment as provided in this section. (6) The Board-regulated institution has implemented a process (which has received the prior, written approval of the Board) to detect excessive correlation between the creditworthiness of the obligor of the hedged exposure and the protection provider. If excessive correlation is present, the Board-regulated institution may not use the double default treatment for the hedged exposure. (b) (c) (1) For the protected exposure, the Board-regulated institut

official document · source cfr-2024 · id 12:§ 217.135