Document ID: chunk:federal_register_of_legislation:F2023L00733:front:0:p8
Version: federal_register_of_legislation:F2023L00733
Segment Type: other
Provision Reference: 
Character Range: 18214–19235

stress measures the impact on the capital base of an increase in credit spreads and the risk of default.
52.         This stress applies to interest-bearing assets, including cash deposits and floating rate assets. Credit derivatives and zero-coupon instruments such as bank bills must also be included.
53.         The stressed value of an asset must be determined by adding the spread specified in Table 1 to the current yield on the asset and then multiplying the reduced value of the asset by (1 – default factor). The credit spreads and default factors depend on the counterparty grade and the nature of the asset:
    Table 1: Credit spreads and default factors
Counterparty grade  Default (%)  Bonds[6]  Structured/          Re-securitised
                                 spread    securitised spread   spread
                                 (%)       (%)                  (%)
1 (government)      0.0          0.0       0.0                  0.0
1 (other)           0.2          0.6       1.0                  1.8