Document ID: chunk:federal_register_of_legislation:F2022L01562:body:0:p59
Version: federal_register_of_legislation:F2022L01562
Segment Type: other
Provision Reference: 
Character Range: 153221–156250

or more of a class of voting securities of the company; or (ii) consolidation of the company with the ADI for financial reporting purposes.

    [17]  Equity exposures includes direct, indirect and synthetic equity exposures, where indirect exposures represent exposures that will result in a loss to the ADI substantially equivalent to any loss in the direct holding. As an example, this would include lending to a borrower on a non-recourse basis secured against any capital instruments of ADIs and overseas deposit-taking institutions and their subsidiaries, insurance companies and other financial institutions. It would exclude, for example, full recourse lending to a borrower to purchase a well-diversified and well-collateralised portfolio that may include the relevant exposures.

    [18] 'Net long positions' are the gross long positions net of the short positions in the same underlying exposures where the maturity of the short positions either match the maturity of the long positions or have residual maturities of at least one year. They include netting positions in physical instruments and derivatives over the same underlying exposure (including those associated with looking through holdings of index securities).

    [19] An 'equivalent overseas deposit-taking institution' in this Prudential Standard refers to an overseas financial institution that is subject to equivalent minimum prudential standards and level of supervision as an ADI.

    [20] For the purposes of this Prudential Standard, the reference to 'investment' in paragraph 34 of Attachment B to APS 112 includes indirect holdings such as holdings of units in a trust.

    [21] This does not apply to guarantees provided to non-related Registrable Superannuation Entities (RSEs) or RSE licensees within the meaning of the Superannuation Industry (Supervision) Act 1993.

    [22] Indirect exposures represent exposures that will result in a loss to the ADI substantially equivalent to any loss in the direct holding. As an example, this would include lending to a borrower on a non-recourse basis secured against any capital instruments of the ADI or members of the group. It would exclude, for example, full recourse lending to a borrower to purchase a well-diversified and well-collateralised portfolio that may include the relevant exposures.

    [23] Gross long positions in own ordinary shares resulting from holdings of index securities may be netted against short positions in own ordinary shares resulting from short positions in the same underlying index. In such cases, short positions may involve counterparty risk (which will be subject to the relevant counterparty credit risk charges outlined in APS 112, APS 113 and Prudential Standard APS 180 Capital Adequacy: Counterparty Credit Risk).

    [24] Any gains on hedges are to be deducted and any losses on hedges added back.

    [25] Refer to footnote 22.

    [26] This excludes holdings of subordinated debt in commercial (non-financial) institutions. All other holdings