Document ID: chunk:federal_register_of_legislation:F2023L00349:body:0:p31
Version: federal_register_of_legislation:F2023L00349
Segment Type: other
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Character Range: 95313–99158

repricing analysis forms are available for an ADI to report exposures in material foreign currencies and composites of immaterial foreign currencies.

Forms ARF 117.0B.1 to ARF 117.0B.9 Repricing analysis – denominated in foreign currency

When reporting on the foreign currency forms, an ADI must indicate the material currency or composite of immaterial currencies to which each form it is completing relates by:

    (a)                in the case of a material currency, selecting from the currency dropdown list, the three-letter alphabetic International Organization for Standardization (ISO) code[9] (e.g. NZD, USD) of the relevant foreign currency; or

    (b)               in the case of a composite of immaterial currencies, selecting 'OTH' (for 'other') from the currency dropdown list and providing a self-explanatory description for the composite of immaterial currencies (e.g. 'Eastern Europe', 'South-East Asia', 'Pacific Islands') under Description of composite of immaterial currencies. This field is limited to 80 characters.

Maturity ladders

Separate maturity ladders should be used for each material currency and for each composite of immaterial currencies in which an ADI has a non-traded interest rate risk exposure.

To derive a maturity ladder, notional principal cash flows are to be grouped into a series of time bands according to the occurrence of each expected cash flow. The time bands and weighting factors are given in the following table.

Table 1 Time bands for notional principal cash flows

Time band                                             Middle of time band  Proxy of modified duration (years)  Weighting factor[10] (%)
0 to <1 month                                         0.5 months           0.04                                0.08
1 to < 3 months                                       2.0 months           0.16                                0.32
3 to < 6 months                                       4.5 months           0.36                                0.72
6 to < 12 months                                      9.0 months           0.71                                1.43
1 to < 2 years                                        1.5 years            1.38                                2.77
2 to < 3 years                                        2.5 years            2.25                                4.49
3 to < 4 years                                        3.5 years            3.07                                6.14
4 to < 5 years                                        4.5 years            3.85                                7.71
5 to < 7 years                                        6.0 years            5.08                                10.15
7 to < 10 years                                       8.5 years            6.63                                13.26
10 to < 15 years                                      12.5 years           8.92                                17.84
15 to < 20 years                                      17.5 years           11.21                               22.43
20 or more years                                      22.5 years           13.01                               26.03

For each maturity ladder, an ADI's non-traded interest rate risk exposure is calculated as follows:

    (a)                the notional principal cash flows are added up in each time band.  This results in a single positive or negative net notional principal cash flow amount for each time band (item 5 Net position/gap);

    (b)               the net notional principal cash flow for each time band is multiplied by the relevant weighting factor (item 6 Weighting) to estimate the sensitivity of the positions in the different time bands (to an assumed change in interest rates[11]); and

    (c)                the resulting weighted positions are