Document ID: chunk:federal_register_of_legislation:F2024L01073:front:0:p19
Version: federal_register_of_legislation:F2024L01073
Segment Type: other
Provision Reference: 
Character Range: 50107–53111

project, both as the source of repayment and as security for the loan;
         2.           object finance, refers to the method of funding the acquisition of equipment where the repayment of the loan is dependent on the cash flows generated by the specific assets that have been financed and pledged or assigned to the lender; and
         3.           commodities finance, refers to short-term lending to finance reserves, inventories, or receivables of exchange-traded commodities, where the loan will be repaid from the proceeds of the sale of the commodity and the borrower has no independent capacity to repay the loan.
 3.          Where an issue-specific external credit rating is available for a specialised lending exposure, an ADI must apply the risk weights in Table 10.
 4.          An ADI must apply the risk weights in Table 13 to its unrated specialised lending exposures, including any exposures with an issuer-specific external credit rating.

 1.         Risk weights for unrated specialised lending exposures
                                Risk weight (%)
Project finance                 110
Object and commodities finance  100

Retail exposures
 1.          A retail exposure is any exposure to one or more individuals (that is, natural persons), that is not a property exposure or margin lending exposure.
 2.          An ADI must apply the risk weights in Table 14 to its retail exposures, based on the product type.

 1.         Risk weights for retail exposures
                        Risk weight (%)
Credit card exposures   75
Other retail exposures  100

Margin lending exposures
 1.          An ADI must apply a risk weight of 20 per cent to margin lending exposures secured by eligible financial collateral. Where a margin loan is secured by other collateral, an ADI must apply a risk weight of 100 per cent to its exposure.

Subordinated debt
 1.          Subordinated debt includes any facility that is expressly subordinated to another facility, or has the effect of conveying economic subordination to another facility.[9] Subordinated debt that is not required to be deducted from regulatory capital under APS 111 must be risk weighted at 150 per cent.

Equity
 1.          Equity exposures must be defined on the basis of the economic substance of the instrument. Equity exposures include both direct and indirect ownership interests,[10] whether voting or non-voting, in the assets and income of entities, including commercial enterprises and financial institutions. An instrument is considered to be an equity exposure if it meets the following criteria:
         1.           it is irredeemable, in that the return of invested funds can be achieved only by the sale of the investment, the sale of the rights to the investment or by the liquidation of the issuer;
         2.           it does not embody an obligation of the issuer; and
         3.           it conveys a residual claim on the assets or income of the issuer.
 2.          Debt obligations and