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Under the Basel II rules, can collateral received from a customer be reflected in the net gross ratio?

April 26, 2017basel collateral customer gross ii NET ratio received reflected rules

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Under the Basel II rules, can collateral received from a customer be reflected in the net gross ratio?

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(December 21, 2004) Answer: No, the net replacement cost to gross replacement cost ratio (NGR) should not reflect collateral received. Paragraph 87 of the QIS-4 instructions specifies that when an institution chooses to reflect collateral posted to an OTC derivative through an adjustment to the exposure at default (EAD), it should offset the current exposure and potential future exposure by the haircut value of the collateral (CA = C-C*Hc). However, as shown in the formula below, the adjustment for collateral is made after the NGR is calculated. EAD = max {0, (CE + .4 * PFE + .