Document ID: chunk:federal_register_of_legislation:F2024L01519:body:0:p11
Version: federal_register_of_legislation:F2024L01519
Segment Type: other
Provision Reference: 
Character Range: 30145–33946

and procedural difficulties in carrying out the timely management of risks on a consolidated basis.

Where the conditions (c) to (e) do not allow for positions in an offshore site to be netted or offset, an ADI must calculate the market risk charge for that offshore site separately. The ADI must calculate the total market risk charge as the sum of the charge calculated for positions which may be netted according to conditions (c) to (e) and the charges calculated for each of the offshore sites for which the conditions (c) to (e) do not allow netting.

Interest rate risk
     1.              The standard method for measuring the risk of holding or taking positions in debt securities and other interest-rate-related instruments in the trading book covers all fixed-rate and floating-rate debt securities and instruments that behave like them, including non-convertible preference shares.[3] An ADI must also include interest rate exposures arising from forward foreign exchange transactions and forward sales and purchases of equities and commodities. An ADI may include the interest rate exposure (exposure to a change in the value of an option due to a change in the interest rate) on foreign exchange, equity and commodity options. Convertible bonds must be treated as debt securities if they trade like debt securities, and as equities if they trade like equities.

     2.              In determining the capital charge for interest rate risk, an ADI must separately calculate the charges applying to the specific risk of each instrument, irrespective of whether it is a short or a long position, and to the interest rate risk in the portfolio (general market risk) where long and short positions in different securities or instruments can be offset.

Specific risk

     1.              The capital charges for specific risk are outlined in Tables 1 to 5 and paragraphs 6 to 19 of this Attachment. An ADI must not offset between different issues even if the issuer is the same, but may offset matched long and short positions in an identical issue (including positions in derivatives).

    Table 1: Specific risk capital charges

Category                                                 External credit assessment[4]                            Residual term to maturity  Specific risk capital charge (%)
Government                                               AAA to AA-                                                                          0.00
A+ to BBB-                                               6 months or less                                         0.25
                                                         Greater than 6 months and up to and including 24 months  1.00
                                                         Exceeding 24 months                                      1.60
BB+ to B- or unrated                                                                                              8.00
Below B-                                                                                                          12.00

Qualifying                                                                                                        6 months or less           0.25

Greater than 6 months and up to and including 24 months  1.00
Exceeding 24 months                                      1.60
Other                                                    BB+ to BB- or unrated                                                               8.00
Below BB-                                                                                                         12.00

     1.              In Table 1, the 'government' category includes all forms of government paper including bonds, Treasury notes and other short‑term instruments. These debt instruments may be