Document ID: chunk:federal_register_of_legislation:F2024L01073:front:0:p25
Version: federal_register_of_legislation:F2024L01073
Segment Type: other
Provision Reference: 
Character Range: 67852–70655

the counterparty. If the due diligence analysis reflects higher risk characteristics than that implied by the exposure's external rating, an ADI must assign a risk weight at least one bucket higher than that determined by the external rating. Due diligence analysis must not result in the application of a lower risk weight than that determined by the external rating.
 4.              An ADI must not use credit ratings for one entity within a corporate group to determine the risk weight for other entities within the same group. If a rated entity has guaranteed another entity's exposure to the ADI, the guarantee may be recognised for risk-weighting purposes if the criteria set out in Attachment I to this Prudential Standard are satisfied.

Issue-specific and issuer ratings
 1.              Where an ADI has an exposure with an issue-specific rating, the risk weight of the exposure must be assigned based on this rating. Where an exposure does not have an issue-specific rating, the ADI must apply the following requirements:
         1.           where the counterparty has a specific rating for an issued debt, but the ADI's exposure is not an investment in that particular debt, a credit rating which maps to a risk weight lower than that which applies to an unrated exposure may only be applied if the exposure ranks senior or pari passu in all respects to the rated debt issue. If the exposure does not rank senior or pari passu with the rated debt issue, then the ADI must treat the exposure as unrated and apply the corresponding risk weight;
         2.           where the counterparty has an issuer rating, only senior exposures to that counterparty may be assigned a risk weight that corresponds to the issuer rating. If either the issuer or a single issue has a rating grade that maps to a risk weight higher than that applied to unrated exposures, then an exposure to that counterparty which ranks pari passu or is subordinated to either the senior unsecured issuer rating or the exposure with a low credit rating grade must be assigned the same risk weight as is applicable to the low credit rating grade; and
         3.           where the counterparty has a specific high-quality rating that only applies to a limited class of liabilities, this rating may only be used for exposures that fall within that class.

Multiple assessments
 1.              Where a counterparty has multiple ECAI general issuer ratings, or where an issue has multiple ECAI issue-specific ratings and these ratings correspond to multiple credit rating grades, an ADI must apply the following requirements:
         1.           where there are two ratings that correspond to different credit rating grades, the credit rating grade that corresponds to the higher risk weight must be used; or
         2.