Specific instructionsSpecific instructions

Specific instructions

Measurement of assets, liabilities and equity:

Unless specifically advised, the measurement of assets, liabilities and equity items for the repricing analysis is to be completed consistent with the approach used by the institution in complying with AASB 1033 ‘Presentation and Disclosure of Financial Instruments’.

Repricing profile:

We recommend that where possible the repricing analysis should be completed on the basis of the expected repricing profile of assets and liabilities, rather than the contractual repricing (i.e. contractual loan repayment rates) or original maturity. The expected repricing profile of assets and liabilities should take into account expected loan prepayment/amortisation rates and deposit portfolio run-off, rather than contractual repricing where these are expected to be materially different. The absence of prepayment penalties/break clauses should be considered for fixed rate products when determining the amount recorded in the respective time bucket.

If a portfolio of assets (e.g. the trading portfolio) is managed for risk management purposes against a benchmark portfolio or index, it is acceptable to use the repricing profile of the nominated benchmark or index.

The time buckets on the form indicate the periods when the interest rates applying to portfolios (e.g. investments, loans, deposits and borrowings) will reprice (i.e. term to next interest rate repricing/change). They do not indicate the residual term of the original maturity of the instrument itself, however the two may coincide (e.g. bank bills, term deposits/money market loans).

In the case of variable rate loans for example, they do not have a fixed repricing term. Accordingly these should be included in either the 0 to 1 months or 1 to 3 months time bucket, depending on the time frame the institution expects to take to adjust its variable rates after movements in the official or market rate. A 20 year residential loan with a two year fixed interest rate would be included in the 1-2 year time bucket (when the interest rate on the loan will next change/reprice) and not the >5 year time bucket (reflecting the maturity/repayment of the loan). In subsequent quarters, as the term of this fixed interest rate runs its course, it would be included in the 6 -12 month category and so on.

Not all assets and liabilities would be exposed to interest rate risk. Such items should be classified as Non Interest Rate Sensitive Assets/Liabilities.

Shareholders equity should be placed in the non interest rate sensitive bucket, unless analysis has been performed and presented to APRA to indicate another repricing profile.