Document ID: chunk:federal_register_of_legislation:F2024L01519:body:0:p13
Version: federal_register_of_legislation:F2024L01519
Segment Type: other
Provision Reference: 
Character Range: 36562–39692

have a residual maturity of one year or less, provided such instruments do not qualify as capital of the issuing institution;

        6.            issued or guaranteed by OECD state and regional governments or OECD public sector entities;

        7.           issued or guaranteed by an entity that is subject to an equivalent capital adequacy regime (covering both credit and market risk), as determined by APRA;[10] or

        8.           issued by institutions that are deemed, in writing, by APRA to be equivalent to investment grade quality and subject to comparable supervisory and regulatory arrangements.

     1.              An ADI using the internal ratings-based (IRB) approach for credit risk (refer to APS 113) for a portfolio may treat debt securities in that portfolio as qualifying if:

        1.           the securities are rated equivalent[11] to investment grade under the reporting ADI's internal rating system, and APRA has confirmed the rating system complies with the requirements for an IRB approach; and

        2.           the issuer has securities listed on a recognised stock exchange within the meaning of APS 112.

     1.          Fund-raising instruments issued, guaranteed or accepted by an ADI and included in the trading book only attract capital charges for general market risk, not specific risk.[12]

Specific risk for securitisation exposures[13] and resecuritisation exposures

     1.          An ADI must apply a risk-weight of 1250 per cent (i.e. a 100 per cent risk capital charge) to a securitisation or resecuritisation exposure, unless it performs the due diligence specified below. This due diligence requires an ADI to:

        1.           on an ongoing basis, have a comprehensive understanding of the risk characteristics of its individual securitisation exposures, whether on-balance sheet or off-balance sheet, as well as the pools underlying its securitisation exposures;

        2.           have access to and periodically review performance information on the underlying pools in a timely manner;

        3.           for resecuritisations, have access to, and periodically review, information not only on the underlying securitisation tranches but also on the risk characteristics and performance of the pools underlying the securitisation tranches; and

        4.           have a comprehensive understanding of all structural features of a securitisation transaction that may have a material impact on the ADI's exposures to the transaction.

     1.          An ADI using either the standardised approach for credit risk or the standardised approach for market risk must calculate specific risk for securitisation exposures and resecuritisation exposures according to Tables 2 and 3 below. An ADI must apply a risk-weight of 1250 per cent i.e. a 100 per cent risk capital charge to the value of positions with long-term ratings of B+ and below and short-term ratings other than A-1/P-1, A-2/P-2, A-3/P-3. An ADI must also apply a risk-weight of 1250 per cent i.e. a 100 per cent risk capital charge, to the value of unrated positions, other