For each netting set, the exposure at default is the sum of the replacement cost and the potential future exposure (PFE) multiplied by 1.4. The replacement cost is the total market value of the netting set minus the difference between collateral received and collateral posted. When there is a collateral agreement, the threshold and the minimum transfer amount also enter the formula. The Japanese notice calls PFE the "potential future exposure amount"1.

The Basel Committee on Banking Supervision published the final standard on March 31, 20142. In Japan, it was added to the Japanese notice and has applied since March 31, 20183.

Notes

  1. Financial Services Agency, "銀行法第十四条の二の規定に基づき、銀行がその保有する資産等に照らし自己資本の充実の状況が適当であるかどうかを判断するための基準" (Standards for determining whether a bank's capital adequacy is appropriate in light of the assets it holds, under Article 14-2 of the Banking Act, our translation; FSA Notice No. 19 of 2006, consolidated version updated on August 24, 2026), Article 79-2, paragraphs 1 and 2 (pages 190–191) (in Japanese). ↩

  2. Financial Services Agency, "バーゼル銀行監督委員会による最終規則文書「カウンターパーティ信用リスクエクスポージャーの計測に係る標準的手法」の公表について" (Publication of the Basel Committee on Banking Supervision's final standard "The standardised approach for measuring counterparty credit risk exposures") (April 2, 2014) (in Japanese). ↩

  3. Financial Services Agency, "「自己資本比率規制（第１の柱・第３の柱）に関する告示の一部改正（案）」等のパブリックコメントの結果等について" (Results of the public consultation on the draft partial amendments to the notices on capital adequacy regulation (Pillar 1 and Pillar 3), and related matters) (March 23, 2018), "３．公布・適用日" (3. Promulgation and application dates) (in Japanese). ↩