AGN 112 2 Standardised Approach To Credit Risk Risk Weighted Off Balance Sheet Credit Exposures April 2005
January 2008
DRAFT
Guidance Note AGN 112.2
Standardised Approach to Credit Risk: Risk-weighted
Off-balance Sheet Credit Exposures
1.
This Guidance Note and its Attachments set out the procedures and requirements for calculating the risk-weighted amount of an authorised deposittaking institution’s (ADI’s) off-balance sheet credit exposures under the standardised approach for capital adequacy purposes.
Scope
2.
The risk-weighting process used for measuring an ADI’s off-balance sheet credit exposures covers all the ADI’s off-balance sheet business, including both market-related and non-market-related transactions.
Risk-weighted amount
3.
An ADI’s total risk-weighted off-balance sheet credit exposure is calculated as the sum of the risk-weighted amount of all its market-related and non-marketrelated transactions.
4.
The risk-weighted amount of an off-balance sheet transaction that gives rise to credit exposure is generally calculated by means of a two-step process:
(a)
first, the notional amount of the transaction is converted into an onbalance sheet equivalent (i.e. credit equivalent amount) by multiplying the amount by a specified credit conversion factor; and
(b)
second, the resulting credit equivalent amount is multiplied by the riskweight (refer AGN 112.1 Standardised Approach to Credit Risk: Riskweighted On-balance Sheet Credit Exposures) applicable to the counterparty or type of asset. Where the transaction is secured by eligible collateral, guarantee or credit derivative, the credit risk mitigation techniques detailed in AGN 112.3 Standardised Approach to Credit Risk:
Simple Approach to Credit Risk Mitigation, AGN 112.4 Standardised
Approach to Credit Risk: Comprehensive Approach to Credit Risk
Mitigation and AGN 112.6 Standardised Approach to Credit Risk:
Treatment of Credit Derivatives in the Banking Book may be used to reduce the regulatory capital charge of the exposure.
AGN 112.2 – 1
January 2008
DRAFT
5.
An ADI must consult APRA in case of
DRAFT
Guidance Note AGN 112.2
Standardised Approach to Credit Risk: Risk-weighted
Off-balance Sheet Credit Exposures
1.
This Guidance Note and its Attachments set out the procedures and requirements for calculating the risk-weighted amount of an authorised deposittaking institution’s (ADI’s) off-balance sheet credit exposures under the standardised approach for capital adequacy purposes.
Scope
2.
The risk-weighting process used for measuring an ADI’s off-balance sheet credit exposures covers all the ADI’s off-balance sheet business, including both market-related and non-market-related transactions.
Risk-weighted amount
3.
An ADI’s total risk-weighted off-balance sheet credit exposure is calculated as the sum of the risk-weighted amount of all its market-related and non-marketrelated transactions.
4.
The risk-weighted amount of an off-balance sheet transaction that gives rise to credit exposure is generally calculated by means of a two-step process:
(a)
first, the notional amount of the transaction is converted into an onbalance sheet equivalent (i.e. credit equivalent amount) by multiplying the amount by a specified credit conversion factor; and
(b)
second, the resulting credit equivalent amount is multiplied by the riskweight (refer AGN 112.1 Standardised Approach to Credit Risk: Riskweighted On-balance Sheet Credit Exposures) applicable to the counterparty or type of asset. Where the transaction is secured by eligible collateral, guarantee or credit derivative, the credit risk mitigation techniques detailed in AGN 112.3 Standardised Approach to Credit Risk:
Simple Approach to Credit Risk Mitigation, AGN 112.4 Standardised
Approach to Credit Risk: Comprehensive Approach to Credit Risk
Mitigation and AGN 112.6 Standardised Approach to Credit Risk:
Treatment of Credit Derivatives in the Banking Book may be used to reduce the regulatory capital charge of the exposure.
AGN 112.2 – 1
January 2008
DRAFT
5.
An ADI must consult APRA in case of