Document ID: chunk:federal_register_of_legislation:F2023L01599:reg:6:p31
Version: federal_register_of_legislation:F2023L01599
Segment Type: reg
Provision Reference: reg 6 (pt 31/35)
Character Range: 107710–110726

the notional principal amount of the transaction by the appropriate CCF for that transaction as set out in Table 8.
14.         For the purpose of calculating PFCEgross, an ADI may treat matching transactions included in a netting agreement as a single transaction with a notional principal equivalent to the net receipts on those transactions. For this purpose, matching transactions are defined as forward foreign exchange and other similar market-related transactions in which the notional principal is equivalent to cash flows, where the cash flows fall due on the same value date and are in the same currency.
15.         The net to gross ratio (NGR) is the ratio of the net current exposure of all transactions included in a netting agreement to the gross current credit exposure (GCCE) of these same transactions. GCCE is the sum of the mark-to-market values of all transactions covered by a netting agreement with a positive mark-to-market value with no offsetting against contracts with a negative mark-to-market value (with the exception of transactions covered by the definition of NCCE in paragraph 2 of this Attachment). The NGR reflects the risk reducing portfolio effects of netted transactions with respect to current credit exposure. Thus:
16.         The NGR may be calculated using one of the following approaches:
(a)          counterparty-by-counterparty approach – under this approach a unique NGR is applied to each counterparty in calculating the CEA of transactions with that counterparty. NGR is defined as the NCCE of all transactions with an individual counterparty covered by a netting agreement (i.e. NCCEindividual) divided by the GCCE of all the transactions with that counterparty covered by the netting agreement (i.e. GCCEindividual). In calculating GCCEindividual, negative mark-to-market values for individual transactions with the same counterparty may not be used to offset positive mark-to-market values for other transactions with the same counterparty; or
(b)          aggregate approach – under this approach a single NGR is calculated and applied to all counterparties in calculating the CEA for transactions with each of those counterparties. The NGR is the ratio of the sum of all NCCEs of all transactions with all counterparties subject to any netting agreement (i.e. NCCEaggregate) to the sum of all of the GCCEs for all transactions of all counterparties subject to any netting agreement (i.e. GCCEaggregate). In calculating GCCEaggregate, negative mark-to-market values of transactions with one counterparty cannot be used to offset positive mark-to-market values of transactions with that counterparty or any other counterparty included in the aggregate calculations.
17.         An ADI must consistently use either the counterparty-by-counterparty approach or the aggregate approach to calculate the NGR and must inform APRA of which approach it intends to use.

Risk-weighted amount
18.         With respect to the netted exposures determined in paragraphs 12 to