Document ID: chunk:federal_register_of_legislation:F2017L01026:body:0:p18
Version: federal_register_of_legislation:F2017L01026
Segment Type: other
Provision Reference: 
Character Range: 48546–51561

banks.

Outwards risk transfer is a risk transfer that reallocates the claim from the country being reported. Examples of risk transfers are shown in the attachment.

Residents of Australia are any entity whose centre of predominant economic interest is within Australia's economic territory.

Include:
     * households whose principal place of residence is in Australia; and
     * Australian branches and Australian subsidiaries of foreign enterprises, for example, Australian branches of foreign banks.

Exclude:
     * foreign branches and foreign subsidiaries of Australian enterprises, for example, foreign branches of Australian banks.

Risk transfers refers to where claims that have been reallocated from the country of the immediate borrower to the country of ultimate risk as a result of guarantees, collateral, and credit derivatives which are part of the banking book. This includes risk-transfers between different economic sectors in the same country.

The information on the reallocation of claims should be reported as net risk transfers, i.e. the difference of reallocated claims that increase the exposure (inward risk transfers) and those, which reduce the exposure (outward risk transfers) vis-à-vis a given country. All outward and inward risk transfers should add up to the same total.

The risk reallocation should also cover loans to domestic borrowers that are guaranteed by foreign entities that therefore represent inward risk transfers and increase the exposure to the country of the guarantor. Equally foreign lending that is guaranteed by Australian entities (e.g. a domestic export credit agency such as the Export Finance and Insurance Corporation) should be reported as an outward risk transfer, which reduces the exposure to the country of the foreign borrower.

In summary, there are four potential forms of risk reallocation:

    1. Lending to a non-resident that is guaranteed by a non-resident third party.

    In this case both the outward risk transfer from the original borrower and the risk transfer to the guarantor have to be reported.

    ii.             Lending to a non-resident that is guaranteed by an Australian resident third party.

    In  this  case  both  the  outward  risk  transfer  from  the  original  non-resident borrower has to be reported as well as the inward risk transfer to Australia.

    iii.           Lending to a resident that is guaranteed by a non-resident third party.

    In this case, report the outward risk transfer from Australia as well as the inward risk transfer to the non-resident guarantor.

    iv.           Lending to a non-resident where the exposure is extinguished by receiving a cash collateral.

    In  this  case  only  the  outward  risk  transfer  from  the  original  non-resident borrower has to be reported (but no inward risk transfer to Australia).

Examples of risk transfers are shown in the attachment.

Ultimate risk claims refers to claims allocated to the country where the final risk lies. That is,