Document ID: chunk:federal_register_of_legislation:F2024L01182:body:0:p11
Version: federal_register_of_legislation:F2024L01182
Segment Type: other
Provision Reference: 
Character Range: 28304–31406

with paragraph 29 of this Attachment and includes an earnings offset. As such,  incorporates an earnings offset. A negative  is permissible and represents an embedded gain.
 is the optionality capital charge at the calculation date, determined in accordance with paragraph 38 of this Attachment; and
is any other amount that APRA has notified the ADI it must include in the calculation of its IRRBB capital charge, or that has been calculated in accordance with a method specified by APRA.

Classification of banking book items
 1.              For the purpose of calculating its IRRBB capital charge, an ADI must classify banking book items in accordance with paragraphs 4 to 9 of this Attachment.

Market-related items
 1.              All securities[4] in the banking book excluding debt, Additional Tier 1 Capital and Tier 2 Capital issued by the ADI are classified as market-related items. An ADI must designate each banking book item not covered by the previous sentence as either a market-related item or a non-market-related item.[5] The criterion for making such designations forms part of the approved IRRBB model, must be documented, and any change to it constitutes a model change that requires APRA approval.
 2.              Where an ADI holds securities issued in a securitisation:
         1.           if the ADI is an originating ADI of the securitisation, as defined in Prudential Standard APS 120 Securitisation, and the ADI treats the securitisation's underlying assets as on-balance sheet assets of the ADI under Prudential Standard APS 112 Capital Adequacy: Standardised Approach to Credit Risk or Prudential Standard APS 113 Capital Adequacy: Internal Ratings-based Approach to Credit Risk, the ADI must consolidate the balance sheet of the securitisation vehicle with the ADI's balance sheet for the purpose of this Prudential Standard; or
         2.           the ADI must treat the securities as market-related, otherwise.

Non-market-related items
 1.              A non-market-related item is classified as principal-and-interest if it:
         1.           is a deposit; or
         2.           can be represented to an acceptable level of accuracy as a sequence of principal and interest cash flows. For this purpose, cash flows that are economically equivalent to interest, but are not described as such in the contract, must be treated as interest.
 1.              A derivative that is a non-market-related item should be decomposed, if possible, into notional long and short principal-and-interest items whose combined exposure is the same as that of the derivative. Non-market-related items that are not principal-and-interest are classified as non-principal-and-interest items for the purpose of this Prudential Standard.
 2.              A principal-and-interest item is classified as either:
         1.           a non-maturity deposit, which is a deposit that has no specified maturity date and can be withdrawn at any time without notice; or
         2.           an other principal-and-interest (OPI) item.
 3.              A core deposit is a component of