Document ID: chunk:federal_register_of_legislation:F2024L01073:reg:4:p4
Version: federal_register_of_legislation:F2024L01073
Segment Type: reg
Provision Reference: reg 4 (pt 4/21)
Character Range: 81330–84530

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, and its market value has been discounted by 20 per cent.
 4.          SFTs that fulfil all of the following conditions may be risk-weighted at 10 per cent, or at zero per cent where the counterparty is a core market participant as defined in paragraph 20:
         1.           both the exposure and the collateral are cash, or a sovereign security qualifying for a zero per cent risk weight as set out in Attachment B to this Prudential Standard;
         2.           both the exposure and the collateral are denominated in the same currency;
         3.           either the transaction is overnight, or both the exposure and the collateral are marked-to-market daily and are subject to daily remargining;
         4.           following a counterparty's failure to remargin, the time between the last mark-to-market before the failure to remargin and the liquidation of the collateral is no more than four business days;
         5.           the transaction is settled across an established settlement system for that type of transaction;
         6.            the documentation for the transaction is standard market documentation;
         7.           the documentation for the transaction specifies that if the counterparty fails to satisfy an obligation to deliver cash, securities or a margin call, or otherwise defaults, the transaction is immediately terminable; and
         8.           upon any default event, regardless of whether the counterparty is insolvent or bankrupt, the ADI has an unequivocal, legally enforceable right to immediately seize and liquidate the collateral.
 5.          The following entities are core market participants:
         1.           the Australian Government and the Reserve Bank of Australia;
         2.           sovereigns that qualify for a zero per cent risk weight in accordance with Attachment B to this Prudential Standard;
         3.           banks;
         4.           other financial institutions (including insurance companies) eligible for a 20 per cent risk weight as set out in Attachment B to this Prudential Standard; and
         5.           qualifying central counterparties, as defined in APS 180.

The comprehensive approach
 1.          An ADI using the comprehensive approach may take into account the risk mitigating effects of any eligible collateral, in calculating the EAD for each counterparty.

Eligible financial collateral under the comprehensive approach
 1.          Under the comprehensive approach, eligible financial collateral is limited to:
         1.           collateral items listed in paragraph 14 of this Attachment;
         2.           equities (including convertible bonds) that are included in a main index or listed on a recognised exchange; and
         3.           units in trusts that meet the conditions of paragraph 14(f) of this Attachment and that invest in the items detailed in paragraphs 22(a) or 22(b) of this Attachment.

Calculation