Attachment C – Countercyclical capital buffer

1. An ADI must calculate the ADI-specific countercyclical capital buffer requirement as the weighted average of the jurisdictional countercyclical capital buffers that apply in jurisdictions in which the ADI has exposures.
2. The weighting applied to the jurisdictional countercyclical capital buffer in each jurisdiction will be the risk-weighted amount of an ADI’s private sector credit exposures in that jurisdiction, divided by the risk-weighted amount of the ADI’s private sector credit exposures across all jurisdictions, where:
   1. private sector credit exposures are:
      1. on-balance sheet assets, off-balance sheet exposures and on- and off-balance sheet securitisation and resecuritisation exposures determined under APS 112, APS 113 or APS 120, as relevant; and
      2. exposures for which an ADI calculates a trading book capital charge for specific risk, including equity specific risk, interest rate specific risk, incremental risk, securitisation and resecuritisation under APS 116,

to private sector counterparties, excluding ADIs (and equivalent overseas deposit-taking institutions) but including other financial institutions; and

1. the risk-weighted amount of an ADI’s private sector credit exposures is the sum of:

   1. the risk-weighted assets for the assets and exposures in paragraph 2(a)(i) of this Attachment; and
   2. the risk-weighted equivalent trading book capital charges for exposures in paragraph 2(a)(ii) of this Attachment.

2. When determining the jurisdiction to which a private sector credit exposure relates, ADIs must use an ultimate risk basis, where possible. An ADI must use the jurisdiction where the guarantor of the exposure resides, not where the exposure has been booked.

3. APRA may require an ADI to apply a higher countercyclical capital buffer for a particular jurisdiction than may be determined by the regulator in that jurisdiction.

4. For Level 2 purposes, the ADI-specific countercyclical capital buffer must cover all exposures incurred in relevant jurisdictions, even though the business may be undertaken by a member of the Level 2 group that is not itself an ADI or equivalent overseas deposit-taking institution.

5. For the Value-at-Risk (VaR) for specific risk, the incremental risk charge and the comprehensive risk measurement charge included in calculating the ADI-specific countercyclical capital buffer, an ADI must consult with APRA to develop an approach that would translate these charges into individual instrument risk-weights that would then be allocated to the geographic location of the specific counterparties that make up the charge.