Document ID: chunk:federal_register_of_legislation:F2024L01182:body:0:p3
Version: federal_register_of_legislation:F2024L01182
Segment Type: other
Provision Reference: 
Character Range: 6150–9039

A to Prudential Standard APS 116 Capital Adequacy: Market Risk (APS 116));
                         2.         not deducted from an ADI's Common Equity Tier 1 Capital under Prudential Standard APS 111 Capital Adequacy: Measurement of Capital (APS 111); and
                         3.         not included in an ADI's Common Equity Tier 1 Capital (refer to APS 111);
           or
 1.          an off-balance sheet position that alters an ADI's exposure to interest rate risk and is not part of the ADI's trading book.
 1.           calculation date – means the date with reference to which an ADI's IRRBB capital charge is calculated, such that the exposures and observations of interest rates used in the calculation are recorded at the close of business on that day;
 2.           earnings at risk – means the potential impact of interest rate changes on the net interest income earned on the ADI's banking book;
 3.           economic value – means:
         1.             fair value, where it can be determined; or
         2.          the net present value of expected cash flows, otherwise;
 4.            economic value sensitivity – means the potential impact of interest rate changes on the economic value of the ADI's banking book;
 5.           IRB ADI – means an ADI that has been granted approval by APRA to use the internal ratings-based (IRB) approach to credit risk;
 6.           IRRBB capital charge – means the capital that an ADI is required to hold in relation to IRRBB;
 7.             IRRBB management framework – means the organisational structures, processes and systems used in identifying, assessing, measuring, monitoring, controlling and mitigating IRRBB;
 8.             IRRBB measurement system – means the systems and data used to measure IRRBB. An ADI's IRRBB measurement system forms part of its IRRBB management framework. For an ADI that has IRRBB model approval, the IRRBB measurement system includes, but is not limited to, its approved IRRBB model;
 9.           IRRBB model approval – means an approval granted by APRA, for an ADI to use an internal model for determining its IRRBB capital charge;
10.             optionality risk – means the risk of loss in earnings or value due to cash flows varying from what an ADI had assumed, caused either by customers exercising stand-alone or embedded options differently from how the ADI had assumed they would, or by the operation of caps, floors and similar mechanisms that automatically adjust interest payments;
11.         rate lock – means a guarantee by an ADI that a customer may draw down a loan no larger than a nominated limit, at a specified fixed or capped rate, before a nominated expiry date; and
12.           standardised ADI – means an ADI which has not been approved by APRA to use the IRB approach to credit risk.

Adjustments and exclusions
 1.          APRA may adjust or exclude a