Document ID: chunk:federal_register_of_legislation:F2024L01518:body:0:p14
Version: federal_register_of_legislation:F2024L01518
Segment Type: other
Provision Reference: 
Character Range: 37130–40036

of Attachment C to APS 112.
 2.          For any off-balance sheet securitisation exposures, an ADI must apply the relevant CCFs as set out in paragraph 43 of APS 120.
 3.          Provisions that have decreased Tier 1 Capital may be deducted from the credit exposure equivalent amount (i.e. the exposure amount after the application of the relevant CCF). However, the resulting off-balance sheet equivalent amount for these exposures cannot be less than zero.
 4.          If the exposure amount relates to an unsettled regular-way financial asset purchase (i.e. the commitment to pay) that is accounted for at settlement date, an ADI must apply a CCF of 100 per cent. An ADI may offset commitments to pay for unsettled purchases and cash to be received for unsettled sales provided the following conditions are met:
         1.           the financial assets bought and sold that are associated with the cash payables and receivables are included in the ADI's income statement at fair value and allocated to the ADI's trading book in accordance with Attachment A to APS 116; and
         2.           the transactions of the financial assets are settled on a delivery-versus-payment basis.

Derivative exposures
 1.          For the purpose of calculating the exposure measure, an ADI must apply the specific treatment set out in paragraphs 17 to 36 of this Attachment to any derivatives transaction.

Treatment of derivatives
 1.          An ADI must calculate its exposures associated with all derivative transactions, including where it sells protection using a credit derivative, as:
exposure measure = 1.4*(RC + PFE)
where:
RC = the replacement cost, calculated according to paragraph 19 of this Attachment; and
PFE = the potential future exposure, calculated according to paragraphs 20 and 21 of this Attachment.
 1.          An ADI must calculate its exposure to:
         1.           a single derivatives transaction not covered by an eligible bilateral netting agreement by applying the formula in paragraph 17 of this Attachment to each transaction separately; and
         2.           derivatives transactions covered by an eligible bilateral netting agreement by applying the formula in paragraph 17 of this Attachment at the netting set level.[15]
    For this purpose, an eligible bilateral netting agreement is one that meets the criteria in Attachment H to APS 112. Cross-product netting (i.e. between derivatives and SFTs) is not permitted.

Calculation of the replacement cost
 1.          The RC of a transaction or netting set is measured as follows:
RC = max {V - CVMr + CVMp, 0}
where:
V = the market value of the individual derivative transaction, or of the derivative transactions in a netting set;
CVMr = the cash variation margin received that meets the conditions set out in paragraph 23 of this Attachment and for which the amount has not already reduced the market value of