Direct credit substitute definition

Direct credit substitute means an arrangement in which a bank assumes, in form or in substance, credit risk directly or indirectly associated with an on- or off-balance sheet asset or exposure that was not previously owned by the bank (third-party asset) and the risk assumed by the bank exceeds the pro rata share of the bank's interest in the third party asset.

Direct credit substitute means an arrangement in which a bank assumes, in form or in substance, credit risk associated with an on- or off-balance sheet asset or exposure that was not previously owned by the bank (third- party asset) and the risk assumed by the bank exceeds the pro rata share of the bank’s interest in the third-party asset. If a bank has no claim on the third-party asset, then the bank’s assumption of any credit risk is a direct credit substitute. Direct credit substitutes include:

Direct credit substitute means an off-balance sheet exposure that has a risk of loss that is equivalent to a direct claim on the counterparty and includes:

Examples of Direct credit substitute in a sentence

• Direct credit substitute means an ar- rangement in which a bank assumes, in form or in substance, credit risk associated with an on- or off-balance sheet credit exposure that was not previously owned by the bank (third-party asset) and the risk assumed by the bank exceeds the pro rata share of the bank’s interest in the third-party asset.

• Direct credit substitute means an ar- rangement in which a bank holding company assumes, in form or in substance, credit risk associated with an on- or off-balance sheet credit exposure that was not previously owned by the bank holding company (third- party asset) and the risk assumed by the bank holding company exceeds the pro rata share of the bank holding company’s interest in the third-party asset.

• Direct credit substitute means an arrangement in which a bank assumes, in form or in substance, credit risk associated with an on- or off-balance sheet credit exposure that was not previously owned by the bank (third-party asset) and the risk assumed by the bank exceeds the pro rata share of the bank’s interest in the third-party asset.

• Warranties that permit the return of assets in instances of misrepresentation, fraud or incomplete documentation.(4) Direct credit substitute means an arrange- ment in which a bank assumes, in form or in substance, credit risk associated with an on- or off-balance sheet credit exposure that was not previously owned by the bank (third- party asset) and the risk assumed by the bank exceeds the pro rata share of the bank’s interest in the third-party asset.

• Direct credit substitute means an ar- rangement in which an institution as- sumes, in form or in substance, credit risk directly or indirectly associated with an on-or off-balance sheet asset or exposure that was not previously owned by the institution (third-party asset) and the risk assumed by the in- stitution exceeds the pro rata share of the institution’s interest in the third- party asset.

More Definitions of Direct credit substitute

Direct credit substitute means a letter of credit or bank guarantee issued or to be issued by the Issuing Bank in favour of a Beneficiary in such form as is agreed between the Issuing Bank and the Borrower which is required by the Borrower in the ordinary course of its business and which is neither a Documentary L/C nor a Transaction Related Standby L/C;

Direct credit substitute means an arrangement in which a banking organization assumes, in form or in substance, credit risk associated with an on- or off-balance-sheet credit exposure that it did not previously own (that is, a third-party asset) and the risk it assumes exceeds the pro rata share of its interest in the third-party asset. If the banking organization has no claim on the third-party asset, then the organization’s assumption of any credit risk with respect to the third-party asset is a direct-credit substitute.internal-ratings approach to their unrated direct- credit substitutes extended to ABCP programs4 that they sponsor by mapping internal risk ratings to external rating equivalents. These external credit rating equivalents are organized into three ratings categories: investment-grade (BBB and above) credit risk, high non- investment-grade (BB+ through BB-) credit risk, and low non-investment-grade (below BB-) credit risk. These rating categories can then be used to determine whether a direct-credit sub- stitute provided to an ABCP program should be(1) assigned to a risk weight of 100 percent or 200 percent or (2) subject to the ‘‘gross-up’’ treatment, as summarized in the table on the next page.5 (See appendix A for a more detailed description of ABCP programs.)As the table indicates, the minimum risk weight available under the internal risk-ratings approach is 100 percent, regardless of the inter- nal rating.6 Conversely, positions rated below BB- receive the gross-up treatment. That is, the banking organization holding the position must maintain capital against the amount of the posi- tion plus all more senior positions.7 Application of gross-up treatment, in many cases, will result in a full dollar-for-dollar capital charge (the equivalent of a 1,250 percent risk weight) on direct-credit substitutes that fall into the low non-investment-grade category. In addition, the risk-based capital requirement applied to a direct- credit substitute is subject to the low-level- exposure rule. Under the rule, the amount of required risk-based capital would be limited to the lower of a full dollar-for-dollar capital charge against the direct-credit substitute or the effec- tive risk-based capital charge (for example, 8 percent) for the entire amount of assets in the

Direct credit substitute means an arrangement in which an institution assumes, in form or in substance, credit risk associated with an on- or off-balance sheet asset or exposure that was not previously owned by the institution (third-party asset), and the risk assumed by the institution exceeds the pro rata share of the institution's interest in the third-party asset. If an institution has no claim on the third-party asset, then the institution's assumption of any credit risk is a direct credit substitute. Direct credit substitutes include:

Direct credit substitute means an arrangement in which a bank assumes, in form or in substance, credit risk directly or indirectly associated with an on- or off-balance sheet asset or

Direct credit substitute means an arrangement in which a savingsassociation assumes, in form or in substance, any risk of credit lossdirectly or indirectly associated with a third party asset or other financialclaim, that exceeds the savingsassociation’s pro rata share of the asset or claim. If a savings association has no claim on an asset, then the assumption of any risk of credit loss is a directcredit substitute. Direct creditsubstitutes include, but are not limited to:

Direct credit substitute means an arrangement in which a savings association assumes, in form or in substance, any risk of credit loss directly or indirectly associated with a third party asset or other financial claim, that exceeds the savings association’s pro rata share of the asset or claim. If a savings association has no claim on an asset, then the assumption of any risk of credit loss is a direct credit substitute. Direct credit substitutes include, but are not limited to:

Direct credit substitute has the meaning contemplated within (i) the Guideline No. A. dated October 1995 and issued by the Office of the Superintendent of Financial Institutions Canada on Capital Adequacy Requirements, as amended or replaced by any successor guidelines from time to time, when used with respect to any Canadian Letter of Credit, or (ii) Appendix A to 10 XXX 000, when used with respect to any US Letter of Credit.