Internal models method for counterparty credit risk - Basel Accord Provision

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Netting opinions are mandated by CRE53 of Basel III —“internal models method for counterparty credit risk”. As of Early 2020 these provided, at CRE53.64:

53.64 The bank has written and reasoned legal opinions that conclude with a high degree of certainty that, in the event of a legal challenge, relevant courts or administrative authorities would find the bank’s exposure under the Cross-Product Netting Arrangement to be the Cross-Product Net Amount under the laws of all relevant jurisdictions. In reaching this conclusion, legal opinions must address the validity and enforceability of the entire Cross-Product Netting Arrangement under its terms and the impact of the Cross-Product Netting Arrangement on the material provisions of any included bilateral master agreement.
(1) The laws of “all relevant jurisdictions” are: (i) the law of the jurisdiction in which the counterparty is chartered and, if the foreign branch of a counterparty is involved, then also under the law of the jurisdiction in which the branch is located, (ii) the law that governs the individual transactions, and (iii) the law that governs any contract or agreement necessary to effect the netting.
(2) A legal opinion must be generally recognised as such by the legal community in the bank’s home country or a memorandum of law that addresses all relevant issues in a reasoned manner.

Note: The bank “has” written and reasoned legal opinions. Earlier iterations contemplated the bank being able to produce, if asked, such opinions.

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