Banking (prudential standard) determination No. 5 of 2023 (Cth)

Banking (prudential standard) determination No. 5 of 2023

Prudential Standard APS 180 Capital Adequacy: Counterparty Credit Risk

Banking Act 1959

I, Clare Gibney, a delegate of APRA:

(a) under subsection 11AF(3) of the Banking Act 1959 (the Act) REVOKE Banking (prudential standard) determination No. 12 of 2022, including Prudential Standard APS 180 Capital Adequacy: Counterparty Credit Risk made under that determination; and

(b) under subsection 11AF(1) of the Act DETERMINE Prudential Standard APS 180 Capital Adequacy: Counterparty Credit Risk, in the form set out in the schedule, which applies to all ADIs and authorised NOHCs to the extent provided in paragraphs 2 to 4 of the prudential standard.

This instrument commences on 1 January 2024.

Dated: 21 November 2023

Clare Gibney

Executive Director

Policy and Advice Division

Interpretation In this instrument:

APRA means the Australian Prudential Regulation Authority.

ADI and authorised NOHC have their respective meanings given in section 5 of the Act.

Schedule

Prudential Standard APS 180 Capital Adequacy: Counterparty Credit Risk comprises the document commencing on the following page

Prudential Standard APS 180

Capital Adequacy: Counterparty Credit Risk Objectives and key requirements of this Prudential Standard This Prudential Standard requires an authorised deposit-taking institution to adopt risk management practices and hold sufficient regulatory capital for counterparty credit risk exposures arising from over-the-counter derivative transactions, exchange-traded derivative transactions, securities financing transactions and long settlement transactions. The key requirements of this Prudential Standard are that an authorised deposit-taking institution must: * calculate counterparty credit risk exposure amounts according to the standardised approach for measuring counterparty credit risk exposures or the adjusted current exposure method; * apply risk weights to counterparty credit risk exposure amounts for capital adequacy purposes; * where applicable, calculate and hold a credit valuation adjustment risk capital charge; * where applicable, calculate and hold a default fund capital charge for default fund contributions to a qualifying central counterparty; and * adopt risk management practices for bilateral and centrally cleared counterparty credit risk exposures.