Document ID: chunk:federal_register_of_legislation:F2024L01074:body:0:p50
Version: federal_register_of_legislation:F2024L01074
Segment Type: other
Provision Reference: 
Character Range: 136230–139419

as either:
        1.           retail receivables, where the underlying receivables meet the definition of retail exposures; or
        2.           corporate receivables, where the underlying receivables meet the definition of corporate exposures.

Risk-weighted assets for default risk
 1.              When estimating PD and LGD for purchased retail receivables or purchased corporate receivables, an ADI may utilise internal or external reference data. The estimates must be determined on a stand-alone basis without regard to any assumption of recourse of guarantees from the seller or other parties.

Default risk for purchased retail receivables
 1.              An ADI must calculate the capital requirement for default risk for purchased retail receivables using the relevant retail risk-weight function in accordance with Attachment A to this Prudential Standard.
 2.              For hybrid pools containing receivables belonging to more than one retail sub-asset class, if a purchasing ADI cannot separate the exposures by the type of retail sub-asset class, the risk-weight function that produces the highest capital requirement at each PD level must be applied.

Default risk for purchased corporate receivables
 1.              An ADI must calculate the capital requirement for default risk for purchased corporate receivables using the corporate risk-weight function as set out in Attachment A to this Prudential Standard. The ADI must assess the default risk of individual corporate borrowers within each pool of purchased corporate receivables as detailed in Attachment D to this Prudential Standard.

Top-down approach
 1.              Where an ADI is unable to calculate the capital requirement for default risk for purchased corporate receivables as detailed in paragraph 5 of this Attachment, the ADI may use a top-down approach for purchased corporate receivables. The use of a top-down approach is subject to prior approval from APRA.
 2.              To be eligible for the top-down approach, purchased corporate receivables must satisfy the following conditions:
        1.           the receivables are purchased from unrelated, third-party sellers (i.e. an ADI has not been directly or indirectly involved in originating the receivables);
        2.           the receivables have been generated on an arms-length basis between the seller and the obligors. Inter-company accounts receivable and receivables subject to contra-accounts between firms that buy and sell amongst each other are ineligible;[14]
        3.           the purchasing ADI has a claim on all proceeds from the pool of receivables or a pro rata interest in the proceeds commensurate with its exposure to the pool;[15] and
        4.           the maximum size of an individual exposure in the pool of receivables is less than $100,000.
 3.              The existence of full or partial recourse to the seller does not automatically disqualify an ADI from adopting a top-down approach provided the cash flows from the purchased corporate receivables are the primary source of ultimate repayment.
 4.              Under the top-down approach, an ADI must segment pools of purchased corporate