Document ID: chunk:federal_register_of_legislation:F2018L00379:body:0:p10
Version: federal_register_of_legislation:F2018L00379
Segment Type: other
Provision Reference: 
Character Range: 24617–27567

in the table shall be applied to the difference between the outstanding balance (less any loan insurance) and 70 per cent of the security value (where the exposure is 6 months or more worth of payments past due, the valuation must be no older than 12 months).  Where an exposure is secured by other than residential property, an ADI may approach APRA to discuss an appropriate basis upon which to value security held.

Where an exposure is otherwise secured by equivalent or better security arrangements than that described above, an ADI may, on application to APRA, seek to have the provision adjusted to reflect the whole or part of the collateral value.  The following guidelines apply to these security arrangements:

    (a)          guarantees provided by Commonwealth or State governments, or ADIs, may be deducted from the exposure at full value prior to applying the prescribed provisioning requirements;

    (b)          crown leases involving property used for residential purposes may be adjusted in accordance with paragraph 7 of these instructions;

    (c)          bank bills and Government Securities held as collateral if subject to enforceable security in favour of the ADI, may be deducted from the exposure at net current market value prior to applying the prescribed provisioning requirements; and

    (d)          cash on deposit with the ADI may only be deducted for the purposes of prescribed provisioning where the deposits are secured by appropriate contractual arrangements that satisfy the eligible collateral provisions contained in Prudential Standard APS 112 Capital Adequacy: Standardised Approach to Credit Risk.  A right of offset is not considered to provide appropriate security per se.

Category four facilities

This category applies to overdrawn savings accounts and overdrawn limits on credit cards, overdrafts and line of credit advances.  The minimum provision on these items shall be a percentage of the balance outstanding, where the percentage depends on the number of consecutive days the facility has been outside contracted arrangements (i.e. the period of irregularity).  In calculating the minimum provision for each item, except for overdrawn savings accounts, the full amount of the credit drawn is to be included in the balance outstanding.  For overdrawn savings accounts, the provision is only applied to the overdrawn amount.

The minimum provision for category four facilities will be set in accordance to the following table:
Period of Irregularity          Amount of provision (%)
Less than 14 days               0
14 days and less than 90 days   40
90 days and less than 182 days  75
182 days and over               100

Adjusted balances

For category three facilities, where the collateral satisfies the requirements detailed under category three facilities, or APRA has agreed on an appropriate basis to ascribe value for security purposes, the net amount of the exposure is to be