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Banking (prudential standard) determination No. 7 of 2024
Cash-funded credit‑linked notesCash-funded credit‑linked notes
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Cash-funded credit‑linked notes
- If an ADI is a protection buyer in a credit‑linked note, it must enter into the maturity ladder a short position in the underlying interest rate instrument for general market risk purposes. The ADI must also calculate a specific risk capital charge on the short position in the reference entity.
- If an ADI is a protection seller in a credit‑linked note, it must enter into the maturity ladder a long position in the underlying interest rate instrument for general market risk purposes. The ADI must calculate a specific risk capital charge on the long position in the reference entity and the long position in the underlying interest rate instrument (i.e. the long position in the protection buyer).