Status: Please note you should read all Brexit changes to the FCA Handbook and BTS alongside the main FCA transitional directions. Where these directions apply the 'standstill', firms have the choice between complying with the pre-IP completion day rules, or the post-IP completion day rules. To see a full list of Handbook modules affected, please see Annex B to the main FCA transitional directions.

Status: This chapter was amended on 31 December 2020 as a result of Brexit. However, it is subject to the FCA Prudential Transitional Direction, which means that firms should not comply with these provisions yet. Instead, firms must follow this link and continue to comply with pre-IP completion day requirements (unless specified otherwise in the Direction). To see a full list of Handbook modules affected, please see Section B of the Annex to the Direction.

IPRU-INV 5.15 OTC derivatives: calculation of credit equivalent amount



By attaching current market values to contracts (marking to market), obtain the current replacement cost of all contracts with positive values.


To obtain a figure for potential future credit exposure, the notional principal amounts or values underlying the firm's aggregate positions are multiplied by the following percentages:

Residual Maturity

Interest-Rate Contracts

Foreign-Exchange Contracts

One year or less




The credit equivalent amount is the sum of current replacement cost and potential future credit exposure.


Except in the case of single-currency "floating/floating interest rate" swaps in which only the current replacement cost will be calculated, bought OTC equity options and covered warrants shall be subject to the treatment accorded to exchange rate contracts.