AI Summary of Article 218 Credit linked notes
Investments in credit linked notes issued by a lending institution can be regarded as cash collateral when evaluating the impact of funded credit protection, as stipulated by the relevant regulatory framework. To qualify, the embedded credit default swap within the credit linked note must meet the criteria for eligible unfunded credit protection.
Furthermore, when assessing the eligibility of the credit default swap, institutions are permitted to rely on the stipulations outlined in point (c) of Article 194(6). This provision ensures clarity in the treatment of such investments, aligning with regulatory objectives for risk management and capital adequacy.
Article 218 Credit linked notes
Investments in credit linked notes issued by the lending institution may be treated as cash collateral for the purpose of calculating the effect of funded credit protection in accordance with this Sub-section, provided that the credit default swap embedded in the credit linked note qualifies as eligible unfunded credit protection. For the purpose of determining whether the credit default swap embedded in a credit linked note qualifies as eligible unfunded credit protection, the institution may consider the condition in point (c) of Article 194(6) to be met.