Document ID: chunk:federal_register_of_legislation:F2024L01181:body:0:p2
Version: federal_register_of_legislation:F2024L01181
Segment Type: other
Provision Reference: 
Character Range: 3349–6264

ADI in this Prudential Standard shall be taken as a reference to:
             1.           an ADI on a Level 1 basis; and
             2.           a group of which an ADI is a member on a Level 2 basis.
     3.              If an ADI to which the Prudential Standard applies is:
             1.           the holding company for a group, the ADI must ensure that the requirements in this Prudential Standard are met on a Level 2 basis, where applicable; or

             2.           a subsidiary of an authorised non-operating holding company (authorised NOHC), the authorised NOHC must ensure that the requirements in this Prudential Standard are met on a Level 2 basis, where applicable.

Interpretation

     1.              Terms that are defined in Prudential Standard CPS 001 Defined terms appear in bold the first time they are used in this Prudential Standard.

Scope

     1.              For the purposes of this Prudential Standard, an ADI's banking book is comprised of the following items (banking book items):
 1.           all on-balance sheet items with the exception of:
            1.             items that are part of the ADI's trading book. An ADI's on-balance sheet and off-balance sheet positions may be allocated to the banking or trading books according to the ADI's trading book policy statement (refer to Attachment A to Prudential Standard APS 116 Capital Adequacy: Market Risk (APS 116)).  APS 116 provides details for the purpose of calculating capital to be held against the interest rate risk in an ADI's trading book;

            2.          items that are deducted from the ADI's Common Equity Tier 1 Capital under Prudential Standard APS 111 Capital Adequacy: Measurement of Capital (APS 111);

            3.        items included in the ADI's Common Equity Tier 1 Capital (refer to APS 111); and

 1.           all off-balance sheet items that alter the ADI's exposure to interest rate risk, other than positions that are part of the ADI's trading book. This includes derivatives transacted with other entities within the group of which an ADI is a member (and not part of the ADI's Extended Licensed Entity), for the purpose of determining interest rate risk Regulatory Capital on a Level 1 basis, or with other entities within the group of companies of which an ADI is a member that do not form part of the group, for determining such capital on a Level 2 basis.

Definitions

     1.              The following definitions are used in this Prudential Standard:
             1.           basis risk - the risk of loss in earnings or economic value arising from differences between the actual and expected interest margins on banking book items, where 'margin' means the difference between the interest rate on the items and the implied cost of funds for those items;
             2.           earnings at risk - the potential impact of interest rate changes on the