Document ID: chunk:federal_register_of_legislation:F2022L01620:front:0:p13
Version: federal_register_of_legislation:F2022L01620
Segment Type: other
Provision Reference: 
Character Range: 33246–36243

institution or any of its associated entities;

       (b)          corporate debt securities (including commercial paper) and covered bonds that satisfy all of the following conditions:

           (i)            in the case of corporate debt securities: are not issued by a financial institution or any of its associated entities and are plain vanilla assets whose valuation is readily available based on standard methods and does not depend on private knowledge;

           (ii)         in the case of covered bonds: are not issued by the ADI itself or any of its associated entities;

           (iii)       the assets have a credit rating from a recognised external credit assessment institution (ECAI) of at least AA-[2] or, in the case of an ADI that has approval to use the internal ratings-based (IRB) approach to credit risk under Prudential Standard APS 113 Capital Adequacy: Internal Ratings-based Approach to Credit Risk (APS 113), do not have a credit assessment by a recognised ECAI and are internally rated as having a probability of default (PD) corresponding to a credit rating of at least AA-;

           (iv)        traded in large, deep and active repo or cash markets characterised by a low level of concentration; and

           (v)          proven record as a reliable source of liquidity in the markets (repo or sale) even during stressed market conditions (i.e. maximum decline of price or increase in haircut over a 30-day period during a relevant period of significant liquidity stress not exceeding 10 per cent).

    11.         The portfolio of HQLA2A held by the ADI must be well diversified in terms of type of assets, type of issuer and specific counterparty or issuer.

HQLA2B

    12.         An ADI may include the following as HQLA2B where these assets have been recognised by APRA or the relevant prudential regulator in the jurisdiction where the liquidity risk is taken:

      (a)   subject to a 25 per cent haircut, residential mortgage backed securities that satisfy the following criteria:

           (i)            are not issued by, nor are the underlying exposures originated by,  the ADI itself or an associated entity of the ADI;

           (ii)         have a long-term credit rating from a recognised ECAI of AA or higher[3] or, in the absence of a long-term rating, a short-term rating equivalent in quality to the long-term rating;

           (iii)       traded in large, deep and active repo or cash markets characterised by a low level of concentration;

           (iv)        proven record as a reliable source of liquidity in markets (repo or sale) even during stressed market conditions (i.e. a maximum decline in price not exceeding 20 per cent or increase in haircut over a 30-day period not exceeding 20 percentage points during a relevant period of significant liquidity stress);

           (v)          the underlying asset pool is restricted to residential mortgages and cannot contain structured products;

           (vi)