Document ID: chunk:federal_register_of_legislation:F2024L01074:body:0:p24
Version: federal_register_of_legislation:F2024L01074
Segment Type: other
Provision Reference: 
Character Range: 65132–67920

For corporate, sovereign and financial institution exposures, an ADI must calculate M for each facility. Subject to paragraph 42 of this Attachment, M is the greater of one year and the remaining maturity in years as defined in paragraph 41 of this Attachment. In all cases, M is no greater than five years.
 2.          For an exposure subject to a specified cash flow schedule, M is defined as:
where:
        * CFt denotes the cash flows contractually payable by the borrower in period t and t is expressed in years.
    An ADI must apply a floor of zero to CFt where the cash flow is negative (i.e. payable by the ADI to the borrower), which can occur with some derivative transactions.
 1.          Where an ADI is not able to calculate M for the contracted payments, it must use a more conservative measure that equals the maximum remaining time that the borrower is permitted to take to fully discharge its contractual obligations under the terms of the facility agreement, up to a maximum of five years.
 2.          Where amounts have been drawn by a borrower under a committed facility and the maturity of the drawn amount is less than the maturity of the facility, the maturity of the facility must be used for determining the capital requirement.
 3.          When determining M for derivatives that are subject to a master netting agreement, an ADI must use the weighted average maturity of the derivatives. In this case, the notional amount of each derivative transaction should be used for the purpose of determining the weighted average maturity.

Exceptions to the one-year maturity floor
 1.          For certain short-term exposures, the one-year floor for maturity may be replaced by a one-day floor. The maturity of such transactions must be calculated as the greater of one day and M.
 2.          The one-year floor does not apply to the following exposures:
        1.           collateralised capital-market-driven transactions (e.g. OTC derivative transactions and margin lending) and SFTs with an original maturity of less than one year, where the relevant documentation contains daily remargining clauses. The relevant documentation must also require daily revaluation and include provisions that allow for the prompt liquidation or set-off of collateral in the event of default or failure to remargin. Where these transactions are subject to a master netting agreement, the effective maturity is calculated as the weighted average maturity of the transactions. In this case, a floor equal to the minimum holding period for the transaction type as set out in Table 24 of Attachment G to APS 112 will apply. Where more than one transaction type is contained in the master netting agreement, a floor equal to the highest holding period will apply to the average.