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Banking (prudential standard) determination No. 2 of 2025
Currency mismatchCurrency mismatch
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Currency mismatch
- A currency mismatch exists where a guarantee is denominated in a different currency from that in which the exposure is denominated. In this case, the amount of the exposure deemed to be protected (Ga) must be reduced by the application of a haircut (Hfx) as follows:
Start formula G subscript a equals G times open bracket 1 minus H subscript fx close bracket end formula.
where:
| G = | nominal amount of the guarantee |
|---|---|
| Hfx = | haircut appropriate for the currency mismatch between the guarantee and the underlying exposure. |
- Where there is a currency mismatch, an ADI must apply a haircut of 8 per cent (based on a 10 business day holding period and daily marking-to-market). The haircut must be adjusted depending on the actual frequency of revaluation of the currency mismatch, in accordance with paragraph 32 of Attachment G to this Prudential Standard.