Document ID: chunk:federal_register_of_legislation:F2024C01107:body:0:p51
Version: federal_register_of_legislation:F2024C01107
Segment Type: other
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Character Range: 135254–138825

apply the counterparty risk weighting for Approved Institutions specified in Table A5.2.1 in Annexure 5 to Schedule 1A to that counterparty risk amount where:

(a)        the Market Participant has records demonstrating that the Counterparty is in fact regulated by a Recognised Regulator as specified in Table A5.3.1 in Annexure 5 to Schedule 1A and that the Counterparty's ordinary business is the purchase and sale of Financial Instruments; and

(b)       after the documentation is first obtained by the Market Participant for the purposes of paragraph (a) the Market Participant reconfirms the classification of the Counterparty as an Approved Institution on an annual basis.

(5) Where:

(a)        an exposure to a Counterparty has been guaranteed by an Approved Deposit Taking Institution; and

(b)       the guarantee referred to in paragraph (a) is provided to the Market Participant performing the counterparty risk calculation in writing and provides for direct, explicit, irrevocable and unequivocal recourse to the guarantor,
a counterparty risk weighting of 20% may be applied to the part of the exposure that is covered by the guarantee (the remainder, if any, must be weighted according to the risk weighting of the Counterparty).
(6) Subrule (5) does not apply to indirect guarantees (for example, a guarantee of a guarantee) and letters of comfort.

Annexure 2 to Schedule 1A: Large Exposure Risk Requirement

Part A2.1 Counterparty large exposure risk requirement

A2.1.1 Nature of counterparty large exposure risk amount
The counterparty large exposure risk amount is the absolute sum of the individual counterparty large exposure risk amounts calculated using the method of calculation set out in this Annexure 2.

A2.1.2 Method
(1) The counterparty large exposure amount is:
(a)        zero, if there are no exposures to a Counterparty in respect of transactions at the times specified in Table A2.1;
(b)       zero, if there are aggregate exposures to a Counterparty in respect of transactions at the times specified in Table A2.1 and where these aggregate exposures are less than or equal to 10% of the Market Participant's Liquid Capital; or
(c)        100% of the counterparty risk amount for the exposure calculated in accordance with Annexure 1 to Schedule 1A, if there are aggregate exposures to a Counterparty in respect of transactions referred to in column 1 of Table A2.1 at the times specified in column 3 of Table A2.1 and where these aggregate exposures are greater than 10% of the Market Participant's Liquid Capital.
Table A2.1: Aggregate exposure to Counterparty by transaction type
Transaction Type                             Subject to counterparty large exposure  Time of Exposure                                                                                                                                                                 Reference in Annexure 1
Non-margined Financial Instrument            Yes                                     Greater than 10 Business Days after transaction date                                                                                                                             Subrule A1.2.2(3)
Free Delivery                                No                                      N/A                                                                                                                                                                              N/A
Securities Lending and Borrowing             Yes                                     Date the transaction is due to