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PILLAR 3 DISCLOSURES
(OCBC Group – As at 31 December 2017)
12. COUNTERPARTY CREDIT RISK
12.1
COUNTERPARTY CREDIT RISK EXPOSURES BY APPROACH
Counterparty credit risk (“CCR”) is the risk of a counterparty defaulting before the final settlement of the transaction, which generally
represents uncertain exposures that can vary over time with the movement of underlying market factors such as those in over-the-
counter (“OTC”) derivatives.
The Group currently treats CCR under the Current Exposure Method (“CEM”), with regulatory prescribed add-on that represents the
potential future exposure in addition to the net replacement cost of the OTC derivatives.
The table below provides an overview of the CCR for OTC derivatives and Securities Financing Transactions (“SFTs”).
Counterparty Credit Risk Exposure
by Approach
(a) (b) (c) (d) (e) (f)
Replacement
Cost Potential Future
Exposure Effective
EPE Alpha factor (α) EAD (1) RWA
4,603 6,514 6,344 2,129
–
–
5,110
– –
–
312
–
2,441
(S$ million)
1
CEM (For derivatives)
CCR Internal models method
(For derivatives and SFTs)
FC(SA) for SFTs
FC(CA) for SFTs
VaR for SFTs
Total
2
3
4
5
6
(1)

–
EAD refers to the amount relevant for capital requirements calculation, after taking into account the effects of CRM.
12.2
CVA RISK CAPITAL CHARGE
The Credit Valuation Adjustment (“CVA”) is made to the mark-to-market valuation of OTC derivatives as calculated under the
Standardised approach for the Group, which remained stable in the second half of the year.
(S$ million)
Credit Valuation Adjustments (CVA) Risk Capital Requirements
Total portfolios subject to Advanced CVA capital requirement
(i) VaR component (including the three-times multiplier)
(ii) Stressed VaR component (including the three-times multiplier)
All portfolios subject to Standardised CVA capital requirement
Total portfolios subject to the CVA risk capital requirement
1
2
3
4
(1)

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EAD refers to the amount relevant for capital requirements calculation, after taking into account the effects of CRM.
OCBC ANNUAL REPORT 2017
(a) (b)
EAD (1) RWA
–
–
–
5,917
5,917 –
–
–
1,866
1,866