Document ID: chunk:federal_register_of_legislation:F2022L01348:body:0:p5
Version: federal_register_of_legislation:F2022L01348
Segment Type: other
Provision Reference: 
Character Range: 11294–14283

if applicable, paragraph 7.

GRF_114_3 Off-balance Sheet Business

These instructions must be read in conjunction with the general instruction guide.

Explanatory notes

Counterparty grade

For each item in section 1, report the amounts corresponding to each counterparty grade in Columns (1) to (8).  The counterparty grade is to be determined in accordance with Prudential Standard GPS 001 Definitions (GPS 001) and Prudential Standard GPS 114 Capital Adequacy: Asset Risk Charge (GPS 114), and is in reference to the obligation / asset over which the credit substitute has been written.

Instructions for specific items

Section 1: Credit substitutes provided

     1. Direct credit substitutes

A direct credit substitute is any irrevocable off-balance sheet obligation that carries the same credit risk as a direct extension of credit, such as an undertaking to make a payment to a third party in the event that a counterparty fails to meet a financial obligation, or an undertaking to a counterparty to acquire a potential claim on another party in the event of default by that party (i.e. the risk of loss depends on the creditworthiness of the counterparty or the party on whom a potential claim is acquired).

     1.1.               Guarantees

This is the value, as at the relevant date, of guarantees that constitute direct credit substitutes. A guarantee is a pledge or agreement to be responsible for another party's debt or contractual performance if that other party does not pay or perform.

     1.2.               Credit derivatives

This is the value, as at the relevant date, of sold credit derivative contracts, consistent with the classification and measurement basis used for derivatives by institutions in accordance with accounting standards. A sold credit derivative is a credit derivative that has been sold, or written, by an entity. A credit derivative enables the user to transfer the credit risk of an underlying asset from one party, the protection buyer, to another, the protection seller, in isolation from other risks.

Report this item regardless of whether it is favourable or unfavourable to the reporting entity.

     1.3.               Standby letters of credit

This is the value, as at the relevant date, of standby letters of credit on issue that are serving as financial guarantees for loans, securities and any other financial liabilities. Report only standby letters of credit that constitute direct credit substitutes.

     1.4.               Bill endorsements

This is the value, as at the relevant date, of bills that have been endorsed under bill endorsement lines, but have not been accepted by, or had the prior endorsement of, another authorised deposit-taking institution. Report only bills that constitute direct credit substitutes.

     1.5.               Other direct credit substitutes

This is the value of all other credit substitutes that do not appropriately fall under the above categories.

This is