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===An Important point === | ===An Important point === | ||
Note the difference between [[CRM technique|techniques]] which mitigate a credit risk that you nonetheless have — as above — and those which negate the [[credit exposure]] in the first place. So, ''par example'' | Note the difference between [[CRM technique|techniques]] which mitigate a credit risk that you nonetheless have — as above — and those which negate the [[credit exposure]] in the first place. So, ''par example'': | ||
*a [[title-transfer collateral arrangement]] whereby a bank transfers {{tag|collateral}} to a counterparty outright may, as part of a valid [[netting]] agreement, mitigate that collateral but will leave the bank with an exposure for the return of any [[excess collateral]] or [[haircut]]; however | |||
*transfer under a [[pledged collateral arrangement]] — at least [[to the exent]] that the bank doesn’t surrender legal title<ref>Do not get me started on [[rehypothecation]].</ref> to the collateral at all — will leave the bank with no counterparty {{tag|credit exposure}} at all to the haircut or excess, seeing as it is the bank’s, and if the counterparty goes [[bust]], the bank will be entitled to have it returned in full. | |||
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