Document ID: chunk:federal_register_of_legislation:F2024L01073:reg:4:p3
Version: federal_register_of_legislation:F2024L01073
Segment Type: reg
Provision Reference: reg 4 (pt 3/21)
Character Range: 78469–81575

the following items as eligible financial collateral:
         1.           cash collateral (cash, certificates of deposit and bank bills issued by the ADI) on deposit with the ADI;[19]
         2.           gold bullion;
         3.           debt securities rated by an ECAI that have a credit rating grade of either:
                 1.             four (or better) for long-term securities issued by sovereigns;[20] or
                 2.          three (or better) for short-term or long-term securities issued by other counterparties;
         4.           debt securities not rated by an ECAI where:
                 1.             the securities are issued by a bank as senior debt and are listed on a recognised exchange;
                 2.          all rated issues of the same seniority by the issuing bank have a long-term or short-term credit rating grade of at least three; and
                 3.        the ADI holding the security has no information suggesting that the security justifies a rating below this level;
         5.           senior securitisation exposures, as defined in APS 120, with an external credit rating grade of one;
         6.            units in a listed or unlisted trust where:
                 1.             the unit price of the trust is publicly quoted on a daily basis;
                 2.          the trust is limited to investing in the instruments detailed in paragraphs 14(a) to 14(e) of this Attachment;[21] and
                 3.        for unlisted trusts, the ADI can redeem its investment within three business days.
 2.          Resecuritisation exposures, as defined in APS 120, are not eligible financial collateral.

Risk weights under the simple approach
 1.          Under the simple approach, the portion of an exposure that is secured by received collateral may be risk-weighted according to the risk weight of the received collateral. The risk weight on that portion is subject to a floor of 20 per cent, except under the conditions specified in paragraphs 18 to 20 of this Attachment. The unsecured portion of an exposure must be risk-weighted according to the risk weight applicable to the original counterparty.
 2.          Where cash on deposit, certificates of deposit and bank bills issued by the ADI are held as received collateral at a third-party bank in a non-custodial arrangement, and are pledged or assigned to the ADI and the pledge or assignment is unconditional and irrevocable, the exposure amount covered by the received collateral may be assigned the risk weight of the third-party bank, determined in accordance with Attachment B to this Prudential Standard.
 3.          A zero per cent risk weight may be applied to collateralised transactions where the exposure and the collateral are denominated in the same currency and either:
         1.           the collateral is cash on deposit as defined in paragraph 14(a) of this Attachment; or
         2.           the collateral is in the form of sovereign securities eligible for a zero per cent risk weight as detailed in Attachment B to this Prudential Standard,