Now on the – a lot of the risk reduction comes from the application of CVAs to our replacement values. Where we now have the capability to model the net exposure to derivative counterparties, taking into account valuation adjustments we’ve taken against that receivable and that was a contributory factor to the reduction.
The other is genuine risk reduction. For example, on the monoline commutations, where we received free access to the CDOs, we basically got hold of them and sold their contents. So there was a fair amount of clearing out of old stuff.
Derek de Vries – BofA Merrill Lynch
Just to go back, on changing the model which essentially is sort of not, I guess, real risk reduction. It’s just sort of optical risk reduction. When you say a significant portion are we talking 5 billion francs to 10 billion francs or – I mean what is significant, I guess?
John Cryan
It would have been a larger proportion of the reduction in the credit risk framework.
Derek de Vries – BofA Merrill Lynch
Okay.
John Cryan
It would be credit risk, would be application of valuation adjustments. Now, your – it’s not entirely model because pre-crisis we didn’t do too much CVA work, so during the crisis, we’ve built up credit protection against our derivatives counterparties, which doesn’t say much for how we ran the derivatives business beforehand but nevertheless, we’ve improved the way that we manage that business and manage the risks in it. So there is actually genuine risk mitigation there and then there’s the reflection of that in the risk weighted assets.
Derek de Vries – BofA Merrill Lynch
Got it.
John Cryan
The number you missed on the monolines, just as a refresher for those of you who have forgotten how these things work. We have these negative basis rates where we’re long an asset and the assets were nearly all long of now, it’s CLOs, that’s virtually all we have left. And we protect the value of those with an insurance policy in the form of a CDS from a monoline insurer. But to the extent that CLO falls below 100, the difference between the value and 100 is covered by the monoline. And we didn’t trust the monoline to pay up in full so we took a valuation adjustment against it.
And the impact that we took is only from the CDS losing value, the PRV from the CDS losing value as the CLO goes back up in value, because the market goes up in value. And all we released is the valuation adjustment against that receivable and that was 500 million francs in the quarter. What we didn’t take, was the increase in value of the CLO and the reason we didn’t take that is because we reclassified those to loans and receivables in Q4 last year. So we have this accounting short. If we’d not done that, overall, on reclassification, our trading revenues would have been 1.8 billion francs higher in the quarter.
Derek de Vries – BofA Merrill Lynch
Okay. So to go from the 1 billion francs of FICC and you take the 500 million francs off for the positive impact of the moves in the monoline and then to get back up to the 1 billion francs run rate, that you’re sort of hinting as an underlying. Presumably, you’re not adding back any of that sort of reclassified assets? So there’s obviously 500 million francs that I’m missing there, give or take and what is that?
John Cryan
Well, that would be – the monoline amount is in the FICC numbers.
Derek de Vries – BofA Merrill Lynch
Exactly. So you sort of reported in broad terms of 1 billion francs of revenues there and then you’re saying there’s 500 million francs of positive impact from the monoline moves. So I would strip that out and say there’s an underlying of 500 million francs, but I think you said the underlying is close to 1 billion francs of FICC revenues. So obviously, I’m missing a 500 million francs of negative impact that cancels out the positive impact from the monoline. I was just wondering what that is?
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