4.A bank must use a measure of exposure at default (EAD) for each counterparty to calculate CVA capital for the CVA portfolio. For derivatives exposures, the bank must use the EAD for each counterparty as calculated under the Central Bank's Counterparty Credit Risk Standard (the CCR Standard), including any effects of collateral or offsets per that Standards.

5.For SFTs, the bank must use the measure of counterparty exposure as calculated for the leverage ratio exposure measure. For that measure, the EAD for SFTs is calculated as current exposure without an add-on for potential future exposure, with current exposure calculated as follows:

1. (a)Where a qualifying master netting agreement (MNA) is in place, the current exposure (E*) is the greater of zero and the total fair value of securities and cash lent to a counterparty for all transactions included in the qualifying MNA (>Ei), less the total fair value of cash and securities received from the counterparty for those transactions (>Ci). This is illustrated in the following formula:

   E* = max {0, [∑E_i − ∑C_i]}

   where E* = current exposure,

   ∑E_i = total fair value of securities and cash lent to counterparty “i” and

   ∑C_i = total fair value of securities and cash received from “i”.

2. (b)Where no qualifying MNA is in place, the current exposure for transactions with a counterparty must be calculated on a transaction-by-transaction basis – that is, each transaction is treated as its own netting set, as shown in the following formula:

   E* = max {0, [E − C]}

   where E* = current exposure,

   E = total fair value of securities and cash lent in the transaction, and

   C = total fair value of securities and cash received in the transaction.