Document ID: chunk:federal_register_of_legislation:F2024L01518:body:0:p15
Version: federal_register_of_legislation:F2024L01518
Segment Type: other
Provision Reference: 
Character Range: 39808–42851

of the derivative transactions in a netting set;
CVMr = the cash variation margin received that meets the conditions set out in paragraph 23 of this Attachment and for which the amount has not already reduced the market value of the derivative transaction V under Australian Accounting Standards; and
CVMp = the cash variation margin provided by the ADI that meets the conditions set out in paragraph 23 of this Attachment and for which the amount has not already increased the market value of the derivative transaction V under Australian Accounting Standards.

Calculation of the potential future exposure
 1.          The PFE for derivative exposures must be calculated in accordance with Attachment D to APS 180. Specifically,
PFE = m*AddOnaggregate
where:
m= 1; and
AddOnaggregate = the aggregation of all add-on components calculated in accordance with Attachment D to APS 180. The maturity factor used must reflect the treatment for margined and unmargined transactions.
 1.          Written options must be included in the leverage ratio exposure measure, even where the exposure at default may be set to zero under APS 180.

Treatment of related collateral
 1.          Subject to paragraphs 24 and 29 of this Attachment, an ADI:
         1.           must not reduce its exposure measure by the amount of any derivatives collateral received from a counterparty; and
         2.           must increase its exposure measure by the amount of any derivatives collateral provided by it to a counterparty, where the provision of that collateral has reduced the value of its balance sheet assets under Australian Accounting Standards.

Treatment of cash variation margin
 1.          An ADI may reduce its exposure measure by treating the cash portion of variation margin exchanged between counterparties as a form of pre-settlement payment, if the following conditions are met:
         1.           for trades not cleared through a qualifying central counterparty (QCCP),[16] the cash received by the recipient counterparty must not be segregated. Cash variation margin would satisfy the non-segregation criteria if the recipient counterparty is not subject to any restrictions by law, regulation or agreement on the counterparty's ability to use the cash received;
         2.           variation margin is calculated and exchanged on a daily basis based on mark-to-market valuation of derivatives positions. In order to meet this requirement, derivative positions must be valued daily and cash variation margin must be transferred at least daily to the counterparty;
         3.           the cash variation margin is received in a currency specified in the derivatives contract, governing master netting agreement (MNA),[17] credit support annex to the qualifying MNA or as defined by any netting agreement with a central counterparty (CCP);[18]
         4.           variation margin exchanged is the full amount that would be necessary to extinguish the mark-to-market exposure of the derivative subject to the threshold and minimum