Document ID: chunk:federal_register_of_legislation:F2022L01576:body:0:p3
Version: federal_register_of_legislation:F2022L01576
Segment Type: other
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Character Range: 5858–8838

is also a reference to a counterparty.

Definitions
13.         The following definitions are used in this Prudential Standard in reference to an exposure:
       (a)          non-performing – an exposure that is in default. A default is considered to have occurred with regard to a particular borrower when either, or both, of the events in sub-paragraphs (i) or (ii) have taken place:
(i)            the ADI considers that the borrower is unlikely to pay its credit obligations to the ADI in full, without recourse by the ADI to actions such as realising available security;
              Elements to be taken as indications of unlikeliness to pay include:
              (A)        the ADI puts the credit obligation on non-accrued status (e.g. the lending ADI no longer recognises accrued interest as income or, if recognised, makes an equivalent amount of provisions);
              (B)        the ADI makes a charge-off or account-specific provision resulting from a significant perceived decline in credit quality subsequent to the ADI taking on the exposure;
              (C)        the ADI consents to a distressed restructuring of the credit obligation where this is likely to result in a diminished financial obligation caused by the material forgiveness, or postponement, of principal, interest or fees;
              (D)        the ADI has applied for the borrower's bankruptcy or a similar order in respect of the borrower's credit obligation to the ADI;
              (E)         the borrower has sought or has been placed in bankruptcy or afforded similar protection where this would avoid or delay repayment of any of the credit obligations to the ADI;
              (F)         the ADI sells the credit obligation at a material credit-related economic loss; and
              (G)        the exposure is a reverse mortgage with a loan-to-valuation ratio (LVR) greater than 100 per cent.
(ii)         the borrower is 90 days or more past-due on a credit obligation to the ADI or, in the case of subsidiaries in jurisdictions where a different number of days past-due is set for exposures to individuals (i.e. natural persons) or public sector entities by the national regulator, the borrower is past-due by the number of days (or more) specified by that national regulator.
           An exposure subject to a regular repayment schedule is considered 90 days past-due when:
              (A)        at least 90 calendar days have elapsed since the due date of a contractual payment which has not been met in full;[1] and
              (B)        the total amount unpaid outside contractual arrangements is equivalent to at least 90 days' worth of contractual payments.[2]
       For exposures to individuals, the definition of default may be applied at the level of a particular credit obligation, rather than at the level of the borrower. As such, default by a borrower on one obligation, does not require an ADI to treat all other obligations to the ADI as being