Document ID: chunk:federal_register_of_legislation:F2024L01073:front:0:p18
Version: federal_register_of_legislation:F2024L01073
Segment Type: other
Provision Reference: 
Character Range: 47334–50352

1.          For all other unrated general corporate exposures that are not treated as SME, an ADI must either:
         1.           assign a 100 per cent risk-weight to all exposures; or
         2.           assign an 85 per cent risk-weight to exposures to 'investment grade' corporates and a 110 per cent risk weight to exposures to 'non-investment grade' corporates where the ADI has in place an APRA approved methodology that differentiates between 'investment grade' and 'non-investment grade' corporates.
    An investment grade general corporate refers to a general corporate entity that has adequate capacity to meet its financial commitments in a timely manner and its ability to do so is assessed to be robust against adverse changes in the economic cycle and business conditions. When assessing whether a general corporate exposure is investment grade or non-investment grade, an ADI must assess the general corporate entity against the investment grade definition taking into account the complexity of its business model, performance against industry and peers, and risks posed by the entity's operating environment. An ADI must have sufficient information to conduct adequate due diligence for the assessment of whether the corporate entity is investment grade.

Specialised lending
 1.          A corporate exposure must be classified as a specialised lending exposure if it possesses the following characteristics, either in legal form or economic substance:
         1.           the exposure satisfies the definition of object finance, project finance or commodities finance as set out in paragraph 27 of this Attachment, is not a property exposure and is not secured by derivatives or other securities such as bonds or equities;
         2.           the exposure is typically to an entity that was created specifically to finance or operate physical assets;
         3.           other than the income that it receives from the assets being financed, the borrowing entity has little or no other material assets or activities, and therefore has little or no independent capacity to repay the obligation;
         4.           the terms of the obligation give the ADI a substantial degree of control over the assets and the income that it generates; and
         5.           as a result of the characteristics detailed in 26(a) to 26(d) of this paragraph, the primary source of repayment of the obligation is the income generated by the assets rather than the independent capacity of a broader commercial enterprise.
 2.          The specialised lending asset class includes the following three sub-classes:
         1.           project finance, refers to the method of funding in which the lender looks primarily to the revenues generated by a single project, both as the source of repayment and as security for the loan;
         2.           object finance, refers to the method of funding the acquisition of equipment where the repayment of the loan is dependent on the cash flows generated by