Credit Conversion Factor: Difference between revisions
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Revision as of 15:14, 15 November 2016
Bank supervision - capital adequacy
(CCF).
The CCF converts an off balance sheet exposure to its credit exposure (Risk Weighted Assets) equivalent.
Off balance sheet exposures - like a guarantee - have a probability of becoming a credit exposure and shifting onto the balance sheet, for example if the guarantee is called.
The CCF is an estimate of this probability.
By multiplying the CCF with the value of the guarantee or other off balance sheet exposure, you get the expected value of the credit exposure.
