Document ID: chunk:federal_register_of_legislation:F2023L01572:front:0:p9
Version: federal_register_of_legislation:F2023L01572
Segment Type: other
Provision Reference: 
Character Range: 21607–24540

it must, until such income is irrevocably received, deduct from its Common Equity Tier 1 Capital the amounts involved. Where an originating ADI provides funds to establish a reserve or similar account, those amounts must be deducted from Common Equity Tier 1 Capital until the funds are irrevocably received by the ADI.
30.         Where an originating ADI provides a derivatives transaction (e.g. a basis swap or other interest rate swap) to a securitisation, a positive mark-to-market value of the swap represents the present value of certain future excess cash-flows generated by the asset pool. In this case an ADI must deduct from its Common Equity Tier 1 Capital any positive mark-to-market valuation that it has reported as an on-balance sheet asset or profit until such income is irrevocably received.
31.         Where an originating ADI becomes, or is likely to become, a net payer over the life of a derivatives transaction (e.g. a basis swap or other interest rate swap), the ADI must deduct from Common Equity Tier 1 Capital the negative mark-to-market value of the swap where it has not reported such swap revaluation (expense) in its profit or loss.

Regulatory capital relief
32.         Subject to meeting the operational requirements detailed in Attachment A, an originating ADI of a traditional securitisation may exclude the underlying exposures in the calculation of its Regulatory Capital for credit risk under Prudential Standard APS 112 Capital Adequacy: Standardised Approach to Credit Risk (APS 112) or Prudential Standard APS 113 Capital Adequacy: Internal Ratings-based Approach to Credit Risk (APS 113).
33.         An originating ADI must hold regulatory capital in respect of credit risk for facilities or exposures to an SPV held by the originating ADI that relate to the pool (refer to paragraphs 41 to 44).

Funding-only securitisation
34.         An originating ADI may treat a securitisation as funding-only, subject to meeting the operational requirements detailed in Attachment B. An originating ADI in a funding-only securitisation must include the underlying exposures in the pool in the calculation of its regulatory capital for credit risk under APS 112 or APS 113.[13]
35.         For a funding-only securitisation, an originating ADI is not required to hold regulatory capital in respect of credit risk for facilities or exposures to the SPV held by the originating ADI that relate to the pool.
36.         An originating ADI[14] of a securitisation of revolving credit facilities must treat the securitisation as a funding-only securitisation and comply with the operational requirements for funding-only securitisation (refer to Attachment B). APRA will not regard residential mortgages with redraw facilities as revolving exposures, i.e. a securitisation of revolving credit facilities, provided the redraws or further advances are not expected to be material in relation to the size of