Document ID: chunk:federal_register_of_legislation:F2023L01599:front:0:p6
Version: federal_register_of_legislation:F2023L01599
Segment Type: other
Provision Reference: 
Character Range: 13795–16827

a client of a clearing member has to a CCP reflecting a measure of the current mark-to-market value (replacement cost) and the potential future exposure arising from OTC derivative transactions, exchange-traded derivative transactions, SFTs and long settlement transactions. Trade exposure is calculated on a bilateral basis, and must include the initial margin posted by an ADI, as well as any variation margin due to the ADI from the CCP that has not yet been received; and
(ff)        variation margin — is collateral that is collected or paid to reflect the current mark-to-market exposure resulting from changes in the market value of a derivative.

Key principles
9.             An ADI must include all OTC derivative transactions and exchange-traded derivative transactions (collectively 'derivative transactions'), long settlement transactions[2] and SFTs held in the banking and trading books in applying the counterparty credit risk requirements set out in this Prudential Standard.
10.         An ADI must apply the counterparty credit risk requirements:
(a)          for all bilateral transactions, as set out in Attachment A of this Prudential Standard;
(b)          for all centrally cleared transactions, as set out in Attachment B of this Prudential Standard; and
(c)          for any default fund contribution to a QCCP, as set out in Attachment C of this Prudential Standard;
(d)          for an ADI with approval from APRA to use an internal ratings-based (IRB) approach to credit risk (IRB ADI), the standardised approach for measuring counterparty credit risk exposures (SA-CCR) as set out in Attachment D of this Prudential Standard to calculate its counterparty credit risk exposure amount; or
(e)          for an ADI that does not have approval from APRA to use an IRB approach to credit risk (standardised ADI), the adjusted CEM as set out in Attachment E of this Prudential Standard to calculate its counterparty credit risk exposure amount; and
(f)           for the purpose of calculating the Level 2 Regulatory Capital requirement for the credit exposures of an overseas banking subsidiary that is prudentially regulated by a prescribed New Zealand authority, an ADI must calculate RWA using the prescribed New Zealand authority's equivalent prudential rules as in force from time to time. [3]
11.         APRA may, upon request of a standardised ADI, approve the ADI to use the SA-CCR to calculate its counterparty credit risk exposure amount.
12.         APRA may require a standardised ADI to use the SA-CCR to calculate its counterparty credit risk exposure amount.
13.         The counterparty credit risk requirements comprise:
(a)          the risk-weighted credit exposures for counterparty credit risk, calculated as the sum of any applicable:
(i)            risk-weighted credit exposures for counterparty credit default risk ('default risk RWE');
(ii)         risk-weighted credit exposures for counterparty credit default risk arising from trade exposure to a CCP ('trade exposure RWE'); and