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BIPRU 13.2 Unusual Transactions

BIPRU 13.2.1R

If the calculation of the amount of an exposure or of a combination of exposures under BIPRU 13 would materially understate the amount of the counterparty credit risk the firm must increase the amount of the credit risk capital requirement by an amount sufficient to compensate for that understatement.

BIPRU 13.2.2R

If a firm in relation to an exposure covered by BIPRU 13:

  1. (1)

    has an exposure of a non-standard type; or

  2. (2)

    an exposure that is part of a non-standard arrangement; or

  3. (3)

    has an exposure that, taken together with other exposures (whether or not they are subject to BIPRU 13), gives rise to a non-standard counterparty credit risk; or

  4. (4)

    is subject to the rule in BIPRU 13.2.1 R;

it must notify the appropriate regulator as soon as practicable of that fact, the counterparty involved, the nature of the exposure or arrangement and the treatment of those exposures it has adopted for the purpose of the calculation of the credit risk capital requirement.

BIPRU 13.2.3R

BIPRU 13.2.2 R does not apply to exposures which are within the scope of a firm's CCR internal model method permission.

BIPRU 13.2.4R

A firm must judge the question of what is non-standard for the purposes of BIPRU 13.2.2 R by reference to the standards:

  1. (1)

    prevailing at the time the rule is being applied; and

  2. (2)

    of firms generally who carry on business which might give rise to exposures covered by BIPRU 13 rather than merely by reference to the firm's own business.

BIPRU 13.2.5G

The methodologies which have been developed assume instruments with standard characteristics. There are many examples, however, of instruments which, although based on a standard contract, contain structural features which make the rules, as stated, inappropriate. In such circumstances a firm should consult the appropriate regulator.