Document ID: chunk:federal_register_of_legislation:F2022L01563:body:0:p4
Version: federal_register_of_legislation:F2022L01563
Segment Type: other
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Character Range: 8394–11534

to 22 of this Prudential Standard.[2]
20.         For the purposes of paragraph 15 of this Prudential Standard, an ADI's fee and commission component is the maximum of:
(a)          the annual average over the most recent three years of the ADI's fee and commission income;[3] and
(b)          the annual average over the most recent three years of the ADI's fee and commission expenses.[4]
21.         For the purposes of paragraph 15 of this Prudential Standard, an ADI's trading book component is the annual average over the most recent three years of the absolute value of the net profit (loss) on the ADI's trading book.[5] This includes the net profit (loss) on trading assets and trading liabilities, hedge accounting and exchange differences.
22.         For the purposes of paragraph 15 of this Prudential Standard, an ADI's banking book component is the annual average over the most recent three years of the absolute value of the net profit (loss) on the ADI's banking book.[6] This includes the net profit (loss) on financial assets and liabilities measured at fair value through profit or loss, hedge accounting and exchange differences and realised gains (losses) on financial assets and liabilities not measured at fair value through profit or loss.
23.         For the avoidance of doubt, an ADI must not include the following items in the calculation of a component of the BI in paragraphs 15 to 22 of this Prudential Standard:
(a)          income and expenses from insurance or reinsurance businesses;
(b)          premiums paid and reimbursements/payments received from insurance or reinsurance policies purchased;
(c)          administrative expenses, including staff expenses, outsourcing fees paid for the supply of non-financial services (e.g. logistical, information technology, or human resources services) and other administrative expenses, (e.g. expenses related to information technology, utilities, telephone, travel, office supplies, or postage);
(d)          recovery of administrative expenses including recovery of payments on behalf of customers (e.g. taxes debited to customers);
(e)          expenses of premises and fixed assets, except when these expenses result from operational loss events;
(f)           depreciation/amortisation of tangible and intangible assets, except depreciation/amortisation related to lease assets, which should be included in finance and operating lease expenses;
(g)          provisions or reversal of provisions (e.g. on pensions, commitments and guarantees given), except provisions related to operational loss events;
(h)          expenses due to share capital repayable on demand;
(i)            impairment or reversal of impairment (e.g. on financial assets, non-financial assets, investments in subsidiaries, joint ventures and associates);
(j)            changes in goodwill recognised in profit or loss; or
(k)          corporate income tax (tax based on profits including current tax and deferred tax).
24.         An ADI must base the calculations in paragraphs 15 to 22 of this Prudential Standard on the most recent three years of its audited year-end financial