Document ID: chunk:federal_register_of_legislation:F2024L01073:front:0:p24
Version: federal_register_of_legislation:F2024L01073
Segment Type: other
Provision Reference: 
Character Range: 64932–68108

four business days after the counterparty payment or delivery is due, the ADI must treat the transaction as an exposure; and
         2.           from five business days after the ADI has made its payment or delivery until extinction of the transaction, the ADI must apply a 1250 per cent risk weight to the value transferred plus the positive current exposure amount.
 3.              Where a non-DvP transaction must be treated as an exposure in accordance with paragraph 4(a) of this Attachment, an ADI may:
         1.           apply the relevant risk weight based on the counterparty as detailed in Attachment B to this Prudential Standard; or
         2.           where exposures are not material, apply a 100 per cent risk weight provided that all such exposures are risk-weighted consistently.

Attachment E – Defaulted exposures
 1.              Where an exposure is in default, an ADI must apply the risk weights in Table 19 or Table 20 to the exposure amount, net of any provisions for defaulted exposures and partial write-offs.
 1.              An ADI may recognise eligible credit risk mitigation in calculating the exposure amount.

Risk weights for residential property exposures
 1.              An ADI must apply the risk weights in Table 19 to its defaulted residential property exposures.

 1.         Risk weights for defaulted residential property exposures
                                                   Risk weight (%)
Owner-occupied principal-and-interest with LMI     80
Owner-occupied principal-and-interest without LMI  100
Other standard residential property with LMI       95
Other standard residential property without LMI    120
Non-standard loans                                 150

Risk weights for other defaulted exposures
 1.              An ADI must apply the risk weights in Table 20 to its defaulted exposures that are not residential property exposures.

 1.         Risk weights for other defaulted exposures
                                                                                            Risk weight (%)
Provisions for the defaulted exposure are ≥ 20 per cent of the outstanding exposure amount  100
Provisions for the defaulted exposure are < 20 per cent of the outstanding exposure amount  150

Attachment F – External credit ratings
 1.              An ADI may only use the solicited ratings of ECAIs to determine the credit rating grades that correspond to the risk weights for counterparties and exposures.[18] Ratings must be used consistently for each type of exposure.
 2.              An ADI must only use an ECAI rating that takes into account and reflects the entire amount of credit risk exposure that the ADI has with regard to all amounts owed to it.
 3.              Where an ADI uses the ratings of ECAIs, it must perform due diligence to ensure that the external ratings appropriately and conservatively reflect the creditworthiness of the counterparty. If the due diligence analysis reflects higher risk characteristics than that implied by the exposure's external rating, an ADI must assign a risk weight at least one bucket higher than that determined by the external rating. Due diligence