Sovereign exposures

1. A sovereign exposure includes:

   1. all exposures to Australian and overseas central and subnational governments, where a subnational government is defined as a government of a geographically defined part of a state which has powers to raise revenue and borrow money;
   2. all exposures to the Reserve Bank of Australia and overseas central banks, where a central bank is defined as an entity which is responsible for overseeing and implementing the monetary policy of a state or group of states; and
   3. all exposures to institutions and multilateral development banks eligible for a zero per cent risk weight.[7]

2. An ADI must apply the risk weights in Table 5 to its sovereign exposures, based on the external credit rating of the sovereign, with the exception of those sovereign exposures eligible for a zero per cent risk weight under paragraph 3(c) of this Attachment.

3. Risk weights for sovereign exposures

1. Exposures to the Australian Government and Reserve Bank of Australia that are denominated and funded in Australian dollars may be risk-weighted at zero per cent.