Document ID: chunk:federal_register_of_legislation:F2023L00288:reg:5:p26
Version: federal_register_of_legislation:F2023L00288
Segment Type: reg
Provision Reference: reg 5 (pt 26/27)
Character Range: 91259–94200

should be -30%, -15%, 0%, +20%, +40%.

Table 22: Energy commodity scenarios

All positions in energy commodities (including oil, gas, and electricity) must be included in the stress test portfolio revaluations.  The price shifts should be applied to each commodity separately; a separate scenario matrix should be completed for each energy commodity. In assessing the change in portfolio value for each commodity, positions of differing maturity may be netted.

In column 3 (representing a negative change in volatility), only the entry corresponding to a zero per cent change in price needs to be completed. The changes in price in column 1 should be -40%, -20%, 0%, +20%, +40%.

Table 23: Credit spread risk

All trading book positions which have credit spread risk (including, but not limited to: corporate bonds, floating rate notes, credit derivatives, credit indices, and securitisations) must be included in the credit spread stress test portfolio revaluations.

Columns 1 and 2 are to be completed for exposures which have an external credit assessment (as described in paragraph 5 of Attachment B to APS 116) of BBB- or higher. Column 3 is to be completed for exposures which are either unrated or have an external credit assessment below BBB-.

Long credit exposures (exposures for which credit deterioration causes a loss – table 1) are to be reported separately from short credit exposures (table 2). In table 1, the shocks are related to credit deterioration and losses should be reported as the table applies to long credit exposures only. In table 2, the shocks are related to credit improvement and losses should be reported as the table applies to short credit exposures only.

In Column 1, the price shock applied is either a doubling of the credit spread (table 1) or a halving of the credit spread (table 2). In columns 2 and 3 the price shock is either a 10% fall in market price (table 1) or a 5% increase in market price (table 2).

Refer to APS 120 for the definition of 'securitisation exposure' and 'resecuritisation exposure'.

Under 'non-securitisation (physicals)' include all physical exposures which have credit spread risk and are neither securitisation nor resecuritisation exposures. For example: corporate bonds and floating rate notes.

Under 'non-securitisation (derivatives, excluding credit indices)' include exposures to derivatives (not including indices) which have credit spread risk and are neither securitisation nor resecuritisation exposures. For example: credit default swaps.

Under 'non-securitisation credit indices' include exposures to credit indices such as Itraxx , CDX and LCDX, other than exposures to tranches of those indices.

Under 'securitisation (physicals)' include exposures to physical exposures which have credit spread risk and are securitisation exposures. For example: CLOs, CBOs, ABS, RMBS, and CMBS.

Under 'resecuritisation (physicals)' include exposures