Document ID: chunk:federal_register_of_legislation:F2023L00288:reg:5:p20
Version: federal_register_of_legislation:F2023L00288
Segment Type: reg
Provision Reference: reg 5 (pt 20/27)
Character Range: 76431–79164

each ADI by APRA, and is subject to a minimum of three.

The plus factor is specified by APRA and relates directly to the quarterly back-testing results (refer to paragraphs 81 to 87 of Attachment C to APS 116 and paragraphs 65 to 85 of APG 116). The same plus factor applies to both VaR and stressed VaR.

For an ADI using method two, APRA may specify different scaling factors for different risk categories if it is determined that the quality of an ADI's internal model varies across asset classes.

Column 9 &10 - Scaled average VaR and stressed VaR

For each asset class, multiply the number in column 2 Average VaR over past 60 trading days by the number in column 7 Scaling factor (VaR) to determine the scaled average VaR.

For each asset class, multiply the number in column 4 Average stressed VaR over past 60 trading days by the number in column 8 Scaling factor (stressed VaR) to determine the scaled average stressed VaR.

6.  Incremental risk charge

Where the VaR measures include an estimation of the specific risk charge, report in item 6 the regulatory capital default and migration risks on trading book positions (subject to a capital charge for specific interest rate risk, with the exception of securitisation positions and nth-to-default credit derivatives) that is incremental to the risk captured by the VaR-based calculation (refer to paragraph 49 of Attachment C to APS 116).

The capital charge for incremental risk is given by the maximum of the average of the incremental risk measures over 12 weeks and the most recent incremental risk measure. The incremental risk capital charge is also captured under item 2.3 of the Market risk summary table.

7.  Comprehensive risk charge – correlation trading portfolio

Where an ADI has approval from APRA to adopt the comprehensive risk approach under paragraph 77 of Attachment C to APS 116, it may report in item 7 the specific risk capital requirement for its correlation trading portfolio as the maximum of the capital charge according to the internally developed approach and 8 per cent of the specific risk capital charge according to the standardised measurement approach. The internally developed approach must capture not only incremental default and migration risks, but all price risks associated with the correlation trading portfolio (refer to paragraphs 77 to 79 of Attachment C to APS 116).

The capital charge for comprehensive risk is given by the maximum of the average of the comprehensive risk measures over 12 weeks and the most recent comprehensive risk measure. The comprehensive risk capital charge is also captured under item 2.4 of the Market risk summary table.

8.  Capital charge

The capital charge, using method two,