Document ID: chunk:federal_register_of_legislation:F2023L01599:reg:6:p8
Version: federal_register_of_legislation:F2023L01599
Segment Type: reg
Provision Reference: reg 6 (pt 8/35)
Character Range: 45967–48791

= the clearing member ADI's risk-weighted exposure (RWE) in respect of its default fund exposure to the non-qualifying CCP; and
DF = the clearing member ADI's pre-funded contribution to the default fund of the non-qualifying CCP, plus a proportion, to be specified by APRA, of the ADI's unfunded contributions that are liable to be paid should the CCP so require.

Risk management requirements for centrally cleared exposures
30.         An ADI must establish a process for monitoring by, and regular reporting to, senior management of all of its exposures to CCPs, including exposures arising from trading through a CCP and exposures arising from CCP membership obligations such as default fund contributions. An ADI must also establish a process for regular reporting of material exposures to CCPs to the appropriate committee of the Board of directors (Board).
31.         An ADI must ensure that it maintains adequate capital for its exposures to CCPs, regardless of whether a CCP is classified as a QCCP. In particular, an ADI must consider whether it might need to hold capital in excess of the minimum capital requirements if, for example, (i) its dealings with a CCP give rise to higher risk exposure or (ii) where it is unclear whether a CCP meets the definition of a QCCP in paragraph 8(w) of this Prudential Standard based on the ADI's dealings with the CCP.
32.         For all exposures to CCPs, a clearing member ADI must assess through appropriate scenario analysis and stress testing whether the level of capital held against exposures to a CCP adequately addresses the inherent risks of those transactions. The assessment must include potential future or contingent exposure resulting from future drawings on default fund commitments, and/or from any secondary commitments to take over or replace offsetting transactions from clients of another clearing member in the event that the clearing member defaults or becomes insolvent.
33.         Where a CCP is not based and prudentially supervised in a jurisdiction where the relevant regulator/overseer has publicly indicated that it applies domestic rules and regulations that are consistent with the CPMI-IOSCO Principles for Financial Market Infrastructures as it exists from time to time to the CCP on an ongoing basis, that CCP must be treated as a non-qualifying CCP unless APRA makes a determination that it may be treated as a QCCP.
34.         APRA may require an ADI to hold additional capital against its exposures to a QCCP if an external assessment has found material shortcomings in the regulation of the QCCP and the CCP regulator has not since publicly addressed the issues identified.

Membership of CCPs
35.         A clearing member ADI must have an appropriate risk management framework to cover its activities as a clearing member. Such a