Document ID: chunk:federal_register_of_legislation:F2022L01577:body:0:p9
Version: federal_register_of_legislation:F2022L01577
Segment Type: other
Provision Reference: 
Character Range: 22260–25205

of specific provisions and value adjustments with prior agreement from APRA;
(b)          for instruments that give rise to CCR held in the banking book and trading book (excluding securities financing transactions (SFTs)),[8] the exposure at default as measured under APS 180;
(c)          for SFTs, the exposure value calculated using the simple or comprehensive approach to the recognition of collateral, and applying netting, as required under APS 112; and
(d)          for banking book commitments, all committed exposures i.e. drawn on-balance sheet commitments and undrawn off-balance sheet commitments. Off-balance sheet commitments are to be converted into credit equivalent amounts by applying a 100 per cent conversion factor.

Credit risk mitigation
2.             Eligible CRM techniques for large exposure purposes are those which are allowed in APS 112. Forms of collateral that are only eligible under the internal ratings-based approach in APS 113 are not permitted to be used in reducing exposure values for large exposure purposes.
3.             An ADI must apply an eligible CRM technique in measuring exposures if the eligible CRM technique has been used in calculating the ADI's capital requirements.
4.             Where paragraph 3 of this Attachment applies, an ADI must reduce the exposure value to a counterparty by the amount determined by applying the eligible CRM technique, being:
(a)          for guarantees and credit derivatives, the value of the protected amount;
(b)          when the ADI uses the simple approach to the recognition of collateral in APS 112, the value of the part of the claim collateralised by the market value of the recognised eligible collateral;
(c)          for any instruments with CCR, the value of the collateral as recognised in the calculation of the CCR exposure value; and
(d)          in the case of eligible collateral when the ADI applies the comprehensive approach to the recognition of collateral in APS 112, the value of the collateral adjusted after applying supervisory haircuts. ADIs must not use internally modelled haircuts.
5.             When the exposure value to a counterparty is reduced due to an eligible CRM technique, an ADI must also recognise an exposure to the CRM provider equal to the amount that the exposure value to the original counterparty was reduced (except for credit protection in the form of a credit default swap (CDS), which must be treated in accordance with paragraph 17(b) of this Attachment).
6.             If there is a maturity mismatch in respect of credit risk mitigants, the credit protection (for the purpose of calculating an ADI's large exposures) must be adjusted applying the requirements in Attachments G, I and J of APS 112.[9]

On-balance sheet netting
7.             Where an ADI has legally enforceable netting arrangements in place for loans and deposits, an ADI must use net credit exposures subject to the requirements