Document ID: chunk:federal_register_of_legislation:F2024L01519:body:0:p22
Version: federal_register_of_legislation:F2024L01519
Segment Type: other
Provision Reference: 
Character Range: 62395–65205

4.3 and up to 5.7 years                3.25             0.70
Over 7 and up to 10 years   Over 5.7 and up to 7.3 years                3.75             0.65
Over 10 and up to 15 years  Over 7.3 and up to 9.3 years                4.50             0.60
Over 15 and up to 20 years  Over 9.3 and up to 10.6 years               5.25             0.60
Over 20 years               Over 10.6 and up to 12 years                6.00             0.60
                            Over 12 and up to 20 years                  8.00             0.60
                            Over 20 years                               12.50            0.60

    Table 7: Horizontal disallowances

Zones[22]      Time band    Within the zone  Between adjacent zones  Between zones 1 and 3
Zone 1         0 – 1 month  40%
1 – 3 months
3 – 6 months
6 – 12 months  40%          100%
Zone 2         1 – 2 years  30%
2 – 3 years
3 – 4 years
Zone 3         4 – 5 years  30%
5 – 7 years
7 – 10 years
10 – 15 years
15 – 20 years  40%          100%
Over 20 years

Equity position risk
     1.          The standard method for measuring the risk of equity positions in the trading book applies to long and short positions in all instruments that exhibit market behaviour similar to equities. The method covers ordinary shares, whether voting or non‑voting, convertible securities that behave like equities, and commitments to buy or sell equity securities. An ADI may report long and short positions in instruments relating to the same issuer on a net basis.

     2.          An ADI must calculate the long or short position in the market on a market-by-market basis and must undertake a separate capital calculation for each national market in which the ADI holds equities.

Specific and general market risks

     1.          The capital charge for specific risk must be calculated as eight per cent of the sum of the absolute value of all long equity positions and of all short equity positions.[23]

     2.          The capital charge for general market risk is eight per cent of the net position (sum of all long equity positions and short equity positions) in an equity market.

Equity derivatives

     1.          An ADI must include equity derivatives and off-balance sheet positions that are affected by changes in equity prices in its risk measurement system. Where equities form one leg of a forward or futures contract (the quantity of equities to be received or to be delivered), any interest rate or foreign currency exposure from the other leg of the contract must be reported as set out in paragraphs 3 to 41 and paragraphs 56 to 64 of this Attachment.

     2.          The treatment of equity options is set out in paragraphs 77 to 95 of this Attachment. To calculate the relevant charges for equity position risk for other