FW, I don't understand this bit then, on page 1 of the link:
"4. The risk-weighted amount of an off-balance sheet transaction which gives rise to credit exposure is calculated by means of a two-step process:
(a) firstly, the principal amount (or face value) of the transaction is converted into an on-balance sheet equivalent (i.e. credit equivalent amount) by multiplying it with a specified credit conversion factor; and
(b) secondly, multiplying the resulting credit equivalent amount by the risk weight (refer Attachment A to Guidance Note AGN 112.1 Risk-Weighted On-Balance Sheet Exposures (AGN 112.1)) applicable to the counterparty or type of assets or where relevant, the eligible guarantor or collateral security (refer AGN 112.1) as appropriate."
Doesn't this show how the ADI is to convert any off BS transaction into its balance sheet exposure?
I am grateful to you for your time on this. It is the first time in ten years I've found someone to discuss it with.
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