Document ID: chunk:federal_register_of_legislation:F2022L01578:front:0:p20
Version: federal_register_of_legislation:F2022L01578
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a positive mark to-market value with no offsetting against contracts with a negative mark-to-market value.
(d)          The 'gross standardised initial margin amount' is the sum over all derivative contracts in the netting agreement of the gross notional size of each derivative contract multiplied by the relevant initial margin rate provided in the standardised schedule in Table 3. Simple netting of notional amounts where contracts are matched by the same underlying and maturity is allowed.[27]

Table 3: Standardised schedule of initial margin rates
Asset class                                                Initial margin rate (% of notional amount)
Credit: Duration less than 2 years                         2%
Credit: Duration from 2 years to less than 5 years         5%
Credit: Duration 5 years or longer                         10%
Commodity                                                  15%
Equity                                                     15%
Foreign exchange                                           6%
Interest rate: Duration less than 2 years                  1%
Interest rate: Duration from 2 years to less than 5 years  2%
Interest rate: Duration 5 years or longer                  4%
Other                                                      15%

Attachment B — Standardised schedule of risk-sensitive haircuts
     1. The risk-sensitive haircut percentage under the standardised schedule is calculated as the sum of the collateral class haircut percentage in Table 4 and the FX haircut percentage outlined in paragraphs 3 and 4 of this Attachment.
     2. APRA may, upon the request of an APRA covered entity, approve the entity to calculate the risk-sensitive haircut using a schedule already in use for regulatory capital purposes prior to the application of this Prudential Standard. Such a schedule must be at least as conservative as that outlined below.
     3. For the purposes of variation margin, an additional FX haircut of eight per cent of market value applies to all non-cash collateral in which the currency of the collateral asset differs from the currency agreed in an individual derivative contract, the relevant governing master netting agreement or the relevant credit support annex.
     4. For the purposes of initial margin, an additional FX haircut of eight per cent of market value applies to all cash and non-cash collateral in which the currency of the collateral asset differs from the termination currency. Each counterparty may specify only one termination currency.
Table 4: Standardised schedule of risk-sensitive haircuts
Collateral class                                                                            Residual maturity  Haircut (% of market value)
Cash                                                                                                           0%
Debt securities under paragraph 47(b) of this Prudential Standard                           ≤1 year            0.5%
>1 year, ≤5 years                                                                           2%
>5 years                                                                                    4%
Debt securities under paragraphs 47(c), 47(d), 47(e) and 47(f) of this Prudential Standard  ≤1 year            1%
>1 year, ≤5 years                                                                           4%
>5 years                                                                                    8%
Equities included in a major stock index                                                                       15%
Gold                                                                                                           15%

Attachment C — Credit rating grades
     1. For the purposes of this Prudential Standard, an APRA covered entity must use the credit rating grades in Table 5 and Table 6 below.