Document ID: chunk:federal_register_of_legislation:F2024L01074:body:0:p22
Version: federal_register_of_legislation:F2024L01074
Segment Type: other
Provision Reference: 
Character Range: 59931–62754

floor specified in Table 7.

Exposure at default estimates
 1.          EAD in respect of each exposure (both on-balance sheet and off-balance sheet) must be measured without deducting any provisions for, and partial write-offs of, that exposure.

On-balance sheet exposures
 1.          Subject to paragraph 31 of this Attachment, EAD for a drawn amount (i.e. an on-balance sheet exposure) must not be less than the current contractual amount owed by the borrower nor should it be less than the sum of:
        1.           the amount by which an ADI's Common Equity Tier 1 Capital would be reduced if the exposure were fully written-off; and
        2.           any associated provisions and partial write-offs.
 2.          When the difference between EAD and the sum of the amounts specified in paragraphs 28(a) and 28(b) of this Attachment is positive, this amount is termed a discount. An ADI must not take into account such discounts when calculating RWA. Such discounts may be included in the measurement of eligible provisions for the purpose of offsetting EL in calculating the ADI's Regulatory Capital requirement in accordance with Attachment C to this Prudential Standard.
 3.          Defaulted exposures purchased by an ADI are not subject to the floor specified in paragraph 28 of this Attachment. For those exposures, EAD must be based on the exposure's carrying value and the discount must be set equal to zero.
 4.          An ADI may recognise on-balance sheet netting of assets and liabilities where it meets the criteria detailed in Attachment H to APS 112. Where there is a currency or maturity mismatch between the relevant assets and liabilities, adjustments must be made in accordance with the treatment set out in APS 112.

Off-balance sheet exposures except those that expose an ADI to counterparty credit risk
 1.          Where an ADI uses:
        1.           supervisory estimates of EAD, EAD for an undrawn commitment is calculated as the committed but undrawn amount multiplied by a CCF; and
        2.           its own estimates of EAD, EAD for an undrawn commitment may be calculated as the committed but undrawn amount multiplied by a CCF or derived from a direct estimate of the total facility EAD.
 2.          Except in the case of retail exposures, CCFs may be applied to the lower of the value of the unused committed credit line and the value of any other constraining factor on the availability of the facility, such as the existence of a ceiling on the potential lending amount that is related to a borrower's reported cash flow or its external credit rating. If the lower value is used, an ADI must have sufficient line monitoring and management procedures to support using the lower value for Regulatory Capital purposes.
 3.          Where an ADI has given a commitment to