• The amendment introduces clearer guidelines for how banks should calculate and maintain capital to cover counterparty credit risk (CCR) exposures.

Key Highlights
Consolidated Basis: A commercial bank needs to comply with the capital adequacy ratio requirements at two levels – the standalone level and the consolidated level.

• The Amendment provides that for computation of capital requirement on a consolidated basis, a bank shall include the CCR exposures of all such entities.

Note: Counterparty Credit Risk (CCR) is the risk that the other party in a financial transaction (like derivatives or swaps) may default before the contract is settled.
Add-on Factors: The most significant operational change is the revision of a table specifying add-on factors used to calculate Potential Future Exposure (PFE) for derivative contracts.