Document ID: chunk:federal_register_of_legislation:F2022L01577:body:0:p11
Version: federal_register_of_legislation:F2022L01577
Segment Type: other
Provision Reference: 
Character Range: 27540–30373

as a distinct counterparty, to counterparties corresponding to the underlying assets or to an aggregated unknown exposure amount (which is treated as applying to a distinct counterparty to the ADI) when the ADI is unable to identify underlying assets.

Offsetting long and short positions in the trading book in the same issue
14.         An ADI may offset long and short positions in the same issue i.e. if the issuer, coupon, currency and maturity are identical resulting in a net position in that specific issue in order to calculate its exposures to a particular issuer.

Offsetting long and short positions in the trading book in different issues
15.         An ADI may offset positions in different issues from the same issuer only when the short position is junior to, or ranks pari passu with, the long position. An ADI may allocate securities into broad categories of seniority (e.g. equity, subordinated debt and senior debt) to determine the relative seniority of positions.
16.         An ADI must not offset long and short positions in different issues relating to the same issuer in calculating its exposure values if it determines that allocation by seniority is not feasible.
17.         For positions hedged by credit derivatives:
(a)          the hedge may be recognised provided the underlying of the hedge and the position hedged satisfy the requirement in paragraph 15 of this Attachment; and
(b)          any reduction in exposure to the original counterparty must result in a new exposure to the credit protection provider (in accordance with paragraph 5 of this Attachment), except where the credit protection is in the form of a CDS and either the CDS provider, or the entity to which the credit protection applies, is not a financial institution. In this situation, the amount assigned to the CDS provider is the exposure at default calculated under APS 180.
18.         An ADI is not permitted to offset trading book positions against banking book positions.
19.         When the result of offsetting in the trading book is a net short position with an individual counterparty, this net short position does not need to be considered as an exposure for the purposes of this Prudential Standard.

Exposure values for covered bonds
20.         An ADI must calculate the exposure value for a covered bond using the full (i.e. 100 per cent) nominal value of its covered bond holding.[12] The counterparty to which the exposure value is assigned is the issuer of the covered bond.

Exposures to structured vehicles
21.         An ADI must calculate an exposure to a structured vehicle (e.g. funds, securitisation vehicles, structured finance products) which holds non-retail assets using the look-through requirements in paragraphs 22 to 26 of this Attachment.
22.         Where an ADI's exposure to a structured