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Interpretation of the Capital Accord for the Multilateral Netting of Forward Value Foreign Exchange Transactions

Risk Weight

For a given participant, each primary loss allocation amount would be added to the corresponding add-on for potential future exposure to arrive at a total credit equivalent amount with respect to each of the other participants in the clearing house. These credit equivalent amounts would then be assigned to the appropriate risk category according to the identity of the other participants (most likely 20 percent) or the nature of the collateral (zero percent). (See collateral discussion below).

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