Document ID: chunk:federal_register_of_legislation:F2023L01599:front:0:p2
Version: federal_register_of_legislation:F2023L01599
Segment Type: other
Provision Reference: 
Character Range: 3081–6026

under section 11AF of the Banking Act 1959 (the Banking Act).

Application
2.             This Prudential Standard applies to all authorised deposit-taking institutions (ADIs) with the exception of:
(a)          foreign ADIs;
(b)          purchased payment facility providers; and
(c)          non-significant financial institutions.
3.             A reference to an ADI in this Prudential Standard, unless otherwise indicated, is a reference to:
(a)          an ADI on a Level 1 basis; and
(b)          a group of which an ADI is a member on a Level 2 basis.
4.             If an ADI to which this Prudential Standard applies is:
(a)          the holding company for a group of bodies corporate, the ADI must ensure that the requirements in this Prudential Standard are met on a Level 2 basis, where applicable; or
(b)          a subsidiary of an authorised non-operating holding company (authorised NOHC), the authorised NOHC must ensure that the requirements in this Prudential Standard are met on a Level 2 basis, where applicable.

Interpretation
5.             Terms that are defined in Prudential Standard APS 001 Definitions appear in bold the first time they are used in this Prudential Standard.
6.             Where this Prudential Standard provides for APRA to exercise a power or discretion, this power or discretion will be exercised in writing.
7.             In this Prudential Standard, unless the contrary intention appears, a reference to an Act, Regulations or Prudential Standard is a reference to the Act, Regulations or Prudential Standard as in force from time to time.

Definitions
8.             The following definitions are used in this Prudential Standard:
(a)          adjusted current exposure method (CEM) — the adjusted CEM approach for measuring counterparty credit risk exposures is the methodology set out in Attachment E of this Prudential Standard;
(b)          central counterparty (CCP) — is a clearing house that interposes itself between counterparties to contracts traded in one or more financial markets, becoming the buyer to every seller and the seller to every buyer. A CCP becomes counterparty to trades with market participants through novation, an open offer system or another legally binding arrangement. For the purposes of the capital framework, a CCP is a financial institution;
(c)          clearing member — is a member of, or a direct participant in, a CCP that is entitled to enter into a transaction with the CCP;
(d)          client of a clearing member — is a party to a transaction with a CCP through either a clearing member acting as a financial intermediary, or a clearing member guaranteeing the performance of the client to the CCP;
(e)          close-out netting — is the process of combining all outstanding transactions and reducing them to a single net payment in the event of default by a counterparty to a netting agreement;
(f)           counterparty credit risk — is