National Environmental Management Act, 1998 (107 of 1998)
R 385
Financial Markets Act, 2012 (Act No. 19 of 2012)RegulationsFinancial Markets Act RegulationsChapter VI : Central Counterparties28. Calculation requirements of the minimum required capital for CVA risk |
In terms of the minimum required capital for CVA risk, calculated in terms of the standardised approach, a central counterparty must calculate the relevant additional required amount of capital on a portfolio basis in accordance with the formula specified below:
where:
A = 
B = 
C = 
| H = | one-year risk horizon, in units of a year, h = 1 |
Wi = the weight applicable to counterparty "i", provided that—
| (i) | based on its external rating, counterparty "i" shall be mapped to one of the seven weights specified in Table 30(A) set out in Schedule A; |
| (ii) | subject to the prior written approval of and such conditions as may be imposed by the Authority, when a counterparty does not have an external rating, the central counterparty must map the relevant internal rating of the counterparty to one of the relevant external ratings specified above. Where a central counterparty does not have a rating and is considered to be unrated, the BBB rating should be used. |
EADitotal
| = | the exposure at default of counterparty "i", aggregated across all relevant netting sets, including the effect of any relevant collateral in accordance with the relevant requirements specified in these Regulations, provided that in the case of— |
| (i) | the central counterparty's exposure to counterparty risk, the central counterparty must apply the following discounting factor to the exposure" |
| Bi = | is the notional amount of purchased single name credit default swaps hedges, which notional amounts shall be aggregated in the case of more than one position referencing counterparty "i", and used to hedge the central counterparty's exposure to CVA risk, provided that the central counterparty must apply the following discounting factor the relevant notional amount: |
| Bind = | the full notional amount of one or more index credit default swaps of purchased protection, used to hedge the central counterparty's exposure to CVA risk, provided that the central counterparty must apply the following discounting factor to the relevant notional amount: |
| Wind = | the relevant weight applicable to index hedges, provided that the central counterparty must map indices to one of the seven weights (wi) specified in Table 30A, based on the average spread of index "ind" |
| Mi = | the effective maturity of the relevant transactions with counterparty "i", provided that— |
| (i) | Mi shall be the notional weighted average maturity as envisaged in (ii) below provided that Mi shall for purposes of this calculation not be capped at 5 years; |
| (ii) | in the case of derivative instruments subject to master netting agreements, the central counterparty must use the notional amount of each transaction to calculate the weighted average maturity of the transactions, which weighted average maturity shall be used in respect of the explicit maturity adjustment, provided that the effective maturity of the relevant exposure shall be equal to the higher of one year; or the remaining effective maturity of the exposure, provided that the calculated maturity shall be limited to five years. |
Mihedge
| = | the maturity of the hedge instrument with notional Bi, provided that in the case of several positions the central counterparty must aggregate the relevant quantities Mihedge Bi. |
| Mind = | the maturity of the index hedge "ind", provided that in the case of more than one index hedge position, it must be the relevant notional weighted average maturity; |
provided that, subject to the prior written approval of, and such conditions as may be determined by the Authority, when a counterparty is also a constituent of an index on which a credit default swap is used to hedge the central counterparty’s exposure to counterparty credit risk, the notional amount attributable to that relevant single name, as per its reference entity weight, may be subtracted from the relevant index credit default swap notional amount and treated as a single name hedge (Bi) of the individual counterparty with maturity based on the maturity of the index.
