Document ID: chunk:federal_register_of_legislation:F2024L01073:reg:4:p5
Version: federal_register_of_legislation:F2024L01073
Segment Type: reg
Provision Reference: reg 4 (pt 5/21)
Character Range: 84277–87251

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 of Regulatory Capital for collateralised transactions
 1.          For a collateralised transaction under the comprehensive approach, including SFTs, an ADI must adjust EAD as follows:
    where:
       E* is the adjusted EAD
           E' is  where Ej is the EAD of the j-th item of exposure or posted collateral under the transaction, prior to haircuts or adjustment for received collateral. For OTC derivatives to which the ADI applies the adjusted CEM (refer to Attachment E to APS 180), E' is the credit equivalent amount of the OTC derivative without adjustment for the impact of collateral
           Hj is the haircut appropriate to the j-th item of exposure or posted collateral under the transaction, calculated in accordance with paragraph 28 of this Attachment
           Ci is the current value of the i-th item of received collateral under the transaction, adjusted for any maturity mismatch in accordance with paragraphs 24 to 27 of this Attachment
           Hi is the haircut appropriate to the i-th item of received collateral under the transaction, calculated in accordance with paragraph 28 of this Attachment
           Hfx,i is the haircut appropriate for currency mismatch between the exposure and the i-th item of received collateral under the transaction, calculated in accordance with paragraph 29 of this Attachment
           A is the margining frequency adjustment factor determined in accordance with paragraph 32 of this Attachment.

Collateral maturity mismatch
 1.          A maturity mismatch exists where the residual maturity of the term of lodgement of the collateral is less than the maturity of the exposure covered by the collateral.
 2.          Where there is a maturity mismatch, the collateral may only be recognised where the original maturity of the term of lodgement of the collateral is greater than or equal to 12 months and the residual maturity is greater than or equal to 3 months.
 3.          For the purpose of determining maturity:
         1.           the effective maturity of the underlying exposure must be calculated using the longest possible remaining time before the counterparty is scheduled to fulfil its obligation; and
         2.           for the collateral, an ADI must take into account any clause or incentive within the documentation supporting the transaction that may reduce its term of lodgement so that the shortest possible effective maturity is used.
 4.          Where there is a maturity mismatch, an ADI must apply the following adjustment:
where:
    C =  value of the collateral adjusted for maturity mismatch
    P =  collateral amount
           t = min (T, residual maturity of the term of lodgement of the collateral) expressed in