Document ID: chunk:federal_register_of_legislation:F2022L01578:front:0:p2
Version: federal_register_of_legislation:F2022L01578
Segment Type: other
Provision Reference: 
Character Range: 2741–6213

non-centrally cleared derivatives.

Schedule

Prudential Standard CPS 226 Margining and risk mitigation for non-centrally cleared derivatives comprises the document commencing on the following page.

Prudential Standard CPS 226

Margining and risk mitigation for
non-centrally cleared derivatives
Objectives and key requirements of this Prudential Standard
This Prudential Standard requires an APRA covered entity to have appropriate margining practices in relation to non-centrally cleared derivatives. An APRA covered entity must exchange variation margin and post and collect initial margin with a covered counterparty, subject to certain criteria.
The key requirements of this Prudential Standard are that an APRA covered entity must:
     * exchange variation margin and post and collect initial margin in transactions with a covered counterparty subject to certain criteria and the implementation timetables;
     * use a zero threshold in the exchange of variation margin;
     * post and collect initial margin on a gross basis calculated by either the standardised schedule or an approved model approach;
     * ensure that initial margin is held in a manner that provides legal certainty to both counterparties in the event of insolvency or bankruptcy; and
     * collect eligible collateral to satisfy margin requirements and apply appropriate risk-sensitive haircuts to collateral collected.
This Prudential Standard also requires an APRA covered entity to apply risk mitigation practices in the areas of trading relationship documentation, trade confirmation, portfolio reconciliation, portfolio compression, valuation processes and dispute resolution processes.

Table of Contents
Authority
Application
Interpretation
Definitions
Adjustments and exclusions
Previous exercise of discretion
Assets in Australia
Exchange of variation margin for non-centrally cleared derivatives
Post and collect of initial margin for non-centrally cleared derivatives
Minimum transfer amount
Due diligence
Calculation of initial margin for non-centrally cleared derivatives
Model approach to initial margin for non-centrally cleared derivatives
Eligible collateral for margining
Collateral haircuts
Treatment of intra-group transactions
Cross border application of margin and risk mitigation requirements
Risk mitigation requirements for non-centrally cleared derivative transactions
Trading relationship documentation
Trade confirmation
Portfolio reconciliation
Portfolio compression
Valuation processes
Dispute resolution
Attachment A — Standardised schedule for initial margin
Attachment B — Standardised schedule of risk-sensitive haircuts
Attachment C — Credit rating grades
Attachment D — Substituted compliance

Authority
     1. This Prudential Standard is made under:
(a)          section 11AF of the Banking Act 1959 (Banking Act);
(b)          section 32 of the Insurance Act 1973 (Insurance Act);
(c)          section 230A of the Life Insurance Act 1995 (Life Insurance Act); and
(d)          section 34C of the Superannuation Industry (Supervision) Act 1993 (SIS Act).

Application
2.             This Prudential Standard applies to all:
(a)          authorised deposit-taking institutions (ADIs), including foreign ADIs, and non-operating holding companies authorised under the Banking Act (authorised banking NOHCs);
(b)          general insurers, including Category C insurers, non-operating holding companies authorised under the Insurance Act (authorised