Document ID: chunk:federal_register_of_legislation:F2022L01620:front:0:p14
Version: federal_register_of_legislation:F2022L01620
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Character Range: 35947–38991

20 per cent or increase in haircut over a 30-day period not exceeding 20 percentage points during a relevant period of significant liquidity stress);

           (v)          the underlying asset pool is restricted to residential mortgages and cannot contain structured products;

           (vi)        the underlying mortgages are full recourse loans and, at issuance, have a maximum average loan-to-valuation ratio (LVR) of 80 per cent; and

           (vii)     the securitisation is subject to risk retention regulations which requires an issuer to retain an interest in the assets they securitise;

      (b)   subject to a 50 per cent haircut, corporate debt securities (including commercial paper) that satisfy the following criteria:

           (i)            are not issued by a financial institution or an associated entity;

           (ii)         either:

              (1) have a long-term credit rating from a recognised ECAI between A+ and BBB-[4] or, in the absence of a long-term rating, a short-term rating equivalent in quality to the long-term rating; or

              (2) in the case of an ADI that has approval to use the IRB approach to credit risk under APS 113, do not have a credit assessment by a recognised ECAI and are internally rated as having a PD estimate corresponding to a credit rating of between A+ and BBB-;

           (iii)       traded in large, deep and active repo or cash markets characterised by a low level of concentration; and

           (iv)        proven record as a reliable source of liquidity in markets (repo or sale) even during stressed market conditions (i.e. a maximum decline in price not exceeding 20 per cent or increase in haircut over a 30-day period not exceeding 20 percentage points during a relevant period of significant liquidity stress).

      (c)   subject to a 50 per cent haircut, common equity shares that satisfy the following criteria:

           (i)            are not issued by a financial institution or an associated entity;

           (ii)         are exchange traded and centrally cleared;

           (iii)       are a constituent of the major stock index where the liquidity risk is taken;

           (iv)        are denominated in the currency of the jurisdiction where a bank's liquidity risk is taken;

           (v)          traded in large, deep active repo or cash markets characterised by a low level of concentration; and

           (vi)        proven record as a reliable source of liquidity in markets (repo or sale) even during stressed market conditions, i.e. a maximum decline in share price not exceeding 40 per cent or increase in haircut not exceeding 40 percentage points over a 30-day period during a relevant period of significant liquidity stress.

Use of alternative liquid asset treatment for LCR

    13.         A locally incorporated LCR ADI may establish a CLF with the RBA, sufficient in size to cover any shortfall in Australian dollars between the ADI's holdings of HQLA and net cash outflows. Qualifying collateral for