Document ID: chunk:federal_register_of_legislation:F2023L01599:front:0:p8
Version: federal_register_of_legislation:F2023L01599
Segment Type: other
Provision Reference: 
Character Range: 19307–22356

discretion by APRA under a previous version of this Prudential Standard or APS 112.

Attachment A — Counterparty credit risk requirements for bilateral transactions
     1. This Attachment applies to OTC derivative transactions, SFTs and long settlement transactions that are not centrally cleared. For the purposes of this Attachment, a long settlement transaction must be treated as an OTC derivative transaction.
     2. This Attachment also applies to centrally cleared transactions, including exchange-traded derivative transactions, which are required to be treated as bilateral transactions under Attachment B.
     3. For bilateral OTC derivative transactions, an ADI must calculate each of the following counterparty credit risk requirements:
(a)          default risk RWE, which reflects the potential loss arising from a default of a counterparty (refer to paragraphs 6 to 12 of this Attachment); and
(b)          a CVA risk capital charge, which accounts for mark-to-market losses arising from a deterioration in a counterparty's credit quality (refer to paragraphs 13 to 20 of this Attachment).
4.             For bilateral SFTs, an ADI must calculate default risk RWE. To determine default risk RWE for SFTs, an ADI must calculate the counterparty credit risk exposure amount according to APS 112[6] and apply the applicable risk weight according to the requirements of APS 112, or for an IRB ADI, according to the requirements of APS 113.
5.             Bilateral SFTs are not subject to a CVA risk capital charge unless APRA has determined that an ADI's CVA loss exposure arising from SFTs is material and notified the ADI that it must calculate a CVA risk capital charge according to paragraphs 13 to 20 of this Attachment.

Default risk RWE for OTC derivative transactions
6.             To determine default risk RWE for OTC derivative transactions, an ADI must calculate a counterparty credit risk exposure amount and apply the relevant risk weight in accordance with paragraph 12 of this Attachment.
7.             The counterparty credit risk exposure amount is:
(a)          for an IRB ADI, the exposure at default (EAD) calculated according to the SA-CCR; or
(b)          for a standardised ADI, the credit equivalent amount (CEA) calculated according to the adjusted CEM.

Counterparty credit risk exposure amount under the SA-CCR
8.             Under the SA-CCR, the counterparty credit risk exposure amount is the EAD for all OTC derivative transactions with a given counterparty, calculated according to the SA-CCR methodology in Attachment D. Eligible netting and collateralisation are incorporated in the SA-CCR methodology.

Counterparty credit risk exposure amount under the adjusted CEM
9.             Under the adjusted CEM, the counterparty credit risk exposure amount is the CEA for all OTC derivative transactions with a given counterparty, calculated by adding together:
(a)          the transaction-level CEA calculated under the adjusted CEM methodology in Attachment E for each transaction not covered by an