Document ID: chunk:federal_register_of_legislation:F2023L00288:reg:5:p4
Version: federal_register_of_legislation:F2023L00288
Segment Type: reg
Provision Reference: reg 5 (pt 4/27)
Character Range: 36295–39164

currency are to be converted to AUD in accordance with AASB 121 The Effects of Changes in Foreign Exchange Rates.

Basis of preparation

Capital charges for each relevant component of the traded market risk, foreign exchange and commodities capital requirement (TFC capital requirement) should be reported on these forms.  The total capital charge for each asset class, assessed using the standard method, is calculated by summing the various components. The total TFC capital requirement is calculated as the sum of the standard method charges for each asset class plus any charge reported under the internal model approach.

For capital adequacy purposes, the capital charges must be multiplied by the constant factor of 12.5 to give a risk-weighted equivalent amount. The RWA equivalent amount of:

    (a)                     the total of the standard method charges for each asset class should be reported under item 3.2 of section B of ARF 110.0; and

    (b)                    the total of any charge under the internal model approach should be reported under item 3.3 of section B of ARF 110.0.

For commentary purposes, a box labelled Comments has been provided under each table.

Specific instructions

For reference purposes, an index of the tables referred to in this instruction guide is included in Attachment A.

   1. STANDARD METHOD

Tables 1 & 2: Interest rate risk – General guidance

All positions forming part of the trading book in debt or other interest rate related securities, including interest rate derivatives, forward foreign exchange and quasi-debt securities that behave like debt (refer to paragraph 3 of Attachment B to APS 116), and securitisation and resecuritisation exposures (refer to APS 120) should be reported in Tables 1 and 2.

The total capital requirement for interest rate risk consists of charges for specific risk, general market risk, and interest rate-sensitive options risks.

Table 1: Specific risk

1. Non-securitisation exposures

Columns 1 & 2 - Short and long positions

The sum of the market values of individual positions, other than securitisation and resecuritisation positions in each issuer category, should be reported in columns 1 and 2 for short and long positions, respectively. In summing the market values within each category, if there is a matched position in the same security (i.e. both the issuer and issue are identical), the matching positions may be offset and omitted from the calculation of specific interest rate risk (refer to paragraphs 5, 35, 36 and 38 to 41 of Attachment B to APS 116).

Specific risk is to be assessed according to the classification of issuer of the security or underlying security in the case of derivative instruments. Issuers are classified into the categories of government, qualifying and other, as defined in paragraphs 6 to 10 of Attachment B