Get a plain-English read of Bank exposures

Turn the raw legal text into a practical explanation grounded in Banking (prudential standard) determination No. 2 of 2025.

Bank exposures

An exposure to a bank counterparty includes all exposures, other than equity or subordinated debt, to an ADI or overseas bank. It includes any exposures to multilateral development banks that are not eligible to be risk-weighted at zero per cent in accordance with paragraph 3(c) of this Attachment.
An ADI must apply the risk weights in Table 7 to its bank exposures, based on the external credit rating of the bank.
Risk weights for bank exposures

Credit rating grade (long-term)	1	2	3	4, 5	6	Unrated
Risk weight (%)(short-term exposure)	20	20	20	50	150	20
Risk weight (%)(long-term exposure)	20	30	50	100	150	50

For the purpose of Table 7, an ADI may apply the short-term exposure risk weights to its bank exposures, where the exposure:
1. has an original maturity of three months or less; or
2. arises from the movement of goods across national borders, with an original maturity of six months or less.[8]
Unrated bank exposures must be risk-weighted as the higher of:
1. 20 per cent for short-term exposures and 50 per cent for long-term exposures; and
2. the risk weight applicable to exposures to the sovereign of the country where the bank counterparty is incorporated.

The sovereign risk-weight floor does not apply to short-term self-liquidating, trade-related contingent items that arise from the movement of goods.[9]

An ADI must apply the risk weights in Table 8 to short-term bank exposures with an issue-specific external credit rating.
Risk weights for bank exposures (short-term issue-specific credit ratings)

Credit rating grade (short term)	1	2	3	4
Risk weight (%)