Specific riskSpecific risk

Specific risk

ADIs whose internal models do not cover specific risk on interest rate related instruments and equities (refer paragraph 22(k) of Guidance Note AGN 113.2 The Internal Model Approach) must complete Table 1 (for specific risk on interest rate instruments) and Table 3 (for specific risk on equity positions) in the standard method section of the reporting form.

ADIs granted APRA approval to use an internal specific risk model covering both idiosyncratic risk and event/default risk (refer paragraphs 43 to 53 of Guidance Note AGN 113.2 The Internal Model Approach) may adopt one of two approaches to reporting their VaR. Firstly, if the ADI has the capacity to separately report specific risk and general market risk amounts it may do so in lines 1 to 3 and lines 6 to 8 of Table 13. Alternatively, if the ADI is not able to separately report specific risk and general market risk amounts then total interest rate risk and total equity risk may be reported using one of the three methods outlined in the section below.

ADIs granted APRA approval to use an internal specific risk model covering idiosyncratic risk but not event/default risk (refer paragraphs 43 to 53 of Guidance Note AGN 113.2 The Internal Model Approach) may adopt one of two approaches to reporting their VaR. Firstly, if the ADI is calculating the specific risk modelling surcharge by separating the specific risk portion of the VaR measure from the model’s estimate of general market risk then the specific and general market risk amounts must be reported separately in lines 1 to 3 and lines 6 to 8 of Table 13. Alternatively, if the ADI is calculating the specific risk modelling surcharge by identifying sub-portfolios that contain specific risk, the ADI must report the VaR amounts for sub-portfolios containing specific risk and those sub-portfolios that do not contain specific risk in lines 4 to 5 and lines 9 to 10 of Table 13.