Attachment A — Approved IRRBB modelsAttachment A — Approved IRRBB models

Attachment A – Approved IRRBB models

1. This Attachment applies to an ADI that has an approved IRRBB model.

IRRBB capital charge

1. The IRRBB capital charge is calculated as:

Formula for calculating the IRRBB capital charge

where for a given repricing assumption In the set m, containing the elements central, shorter and longer,

IRRBB capital charge subscript m at a calculation date calculation date dImage unavailable in extracted textis the greater of zero and:

Formula for the calculating the IRRBB capital charge for a given repricing assumption in the set m

where:

Prospective IRRBB capital charges at the calculation date d and the three latest month-ends, d1, d2 and d3 are respectively the prospective IRRBB capital charges at the calculation date and the latest three month-ends, determined in accordance with paragraph 18 of this Attachment;

Embedded loss at the calculation date d is the embedded loss at the calculation date. This is defined as the sum over all items jwithin an ADI’s augmented banking book of the book value of jminus the PreShockEV subscript j determined in accordance with paragraph 18 of this Attachment. For the avoidance of doubt, the ADI’s augmented banking book is determined in accordance with paragraph 29 of this Attachment and includes an earnings offset. As such, Embedded loss at the calculation date d incorporates an earnings offset. A negative Embedded loss at the calculation date d is permissible and represents an embedded gain.

Optionality capital charge at the calculation date d is the optionality capital charge at the calculation date, determined in accordance with paragraph 38 of this Attachment; and

Any other amount at the calculation date dis any other amount that APRA has notified the ADI it must include in the calculation of its IRRBB capital charge, or that has been calculated in accordance with a method specified by APRA.

Classification of banking book items

1. For the purpose of calculating its IRRBB capital charge, an ADI must classify banking book items in accordance with paragraphs 4 to 9 of this Attachment.