Document ID: chunk:federal_register_of_legislation:F2022L01576:body:0:p25
Version: federal_register_of_legislation:F2022L01576
Segment Type: other
Provision Reference: 
Character Range: 67663–70708

the deposits are secured by appropriate contractual arrangements that satisfy the eligible collateral provisions contained in APS 112. A right of offset is not considered to provide appropriate security per se.

Category Four exposures
17.         This category applies to overdrawn savings accounts and overdrawn limits on revolving exposures such as credit cards, overdrafts and line of credit advances. The minimum provision on these items is a percentage of the balance outstanding, where the percentage depends on the period of irregularity, as shown below. In calculating the minimum provision for each item, except for overdrawn savings accounts, the full amount of the credit drawn must be included in the balance outstanding. For overdrawn savings accounts, the provision is only applied to the overdrawn amount. Refer to Table 3.
Table 3: Category Four exposures
    Period of Irregularity              Amount of Provision (%)
    Up to 14 days                       0
    14 days and less than 90 days       40
    90 days and less than 182 days      75
    182 days and over                   100

Well-secured exposures
18.         A well-secured exposure is, for the purposes of this Attachment, defined as one where an ADI judges that:
       (a)          the value of collateral, including the fair value of associated security is sufficient to ensure that the ADI will recover the outstanding principal, including any previously due but unpaid interest or fees, and other previously unpaid amounts, and any estimated shortfall in all remaining cash flows due over the life of the exposure. This includes any amounts arising over the period until collateral is obtained and settled. Collateral includes any arrangement that protects the ADI from losing, partially or fully, the principal, interest or other amounts due on an exposure. This will include secured interests in assets, lenders mortgage insurance, cash collateral, guarantees, put options and interest servicing arrangements. An ADI must be able to demonstrate to APRA, if required, that any value ascribed to collateral is reliable in a recovery situation; and
       (b)          there is reasonable assurance that collection efforts will result in payment of amounts due in a timely manner, including full compensation for overdue payments.
19.         In determining whether the coverage provided by collateral will enable an ADI to recoup all cash flows due over the life of the exposure, including any outstanding payments due but not yet received, the ADI must take account of any costs, for example, selling costs, involved in taking possession of and realising the value of collateral.

Restructured exposures, assets acquired through security enforcement and other real estate owned
20.         Prescribed provisioning does not apply to restructured exposures, assets acquired through security enforcement and other real estate owned which meet the requirements for items to qualify as performing.

Attachment C – Macroprudential policy: credit measures