Prudential Regulation Authority Rulebook

2.1

In this Part, a debt owed to (or an obligation to be fulfilled for the benefit of) a firm must be regarded as being secured only to the extent that it is:

1. (1) secured by;
1. (a) a letter of credit established with a CRD credit institution; or
2. (b) a guarantee provided by a CRD credit institution
2. and the sum of the aggregate amount available under all letters of credit established for the benefit of the firm with the same counterparty, the aggregate amount of all guarantees issued for the benefit of the firm by that counterparty and the amount of any exposure of the firm to that counterparty does not exceed the permitted counterparty exposure limit for that counterparty; or
3. (2) secured by assets for the valuation of which provision is made in this Part and;
1. (a) the value of such assets (after deducting reasonable expenses of sale and the amount of any other debt or obligation secured thereon having priority to or ranking equally with the debt or obligation) is sufficient to enable the debt or obligation to be discharged in full;
2. (b) the value of the assets when aggregated with the firm’s exposure to assets of the same description does not exceed the permitted counterparty exposure limits; and
3. (c) where the assets give rise to exposure to a counterparty, the exposure of the firm to that counterparty, when added to the sum of the aggregate amount available under all letters of credit established for the benefit of the firm with that counterparty, and the aggregate amount of all guarantees issued for the benefit of the firm by that counterparty, does not exceed the permitted counterparty exposure limit for that counterparty.

2.2

For the purposes of 2.1:

1. (1) the aggregate amount available under letters of credit established with a counterparty must be taken not to exceed the sum of the aggregate amount of all debts and the aggregate value of all obligations in respect of which those letters of credit were established;
2. (2) the aggregate amount of guarantees issued by a counterparty must be taken not to exceed the sum of the aggregate amount of all debts and the aggregate value of all obligations so guaranteed; and
3. (3) assets which are securing any other debt owed to (or obligation to be fulfilled for the benefit of) the firm must be treated as if they were assets of the firm.