Financial Sector (Collection of Data) (reporting standard) determination No. 13 of 2011 - ARS 116.0 - Market Risk
Table 1: Specific riskTable 1: Specific risk
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The sum of the market values of individual positions other than securitisation and resecuritisation positions in each issuer category should be reported in columns 1 and 2 for short and long positions, respectively. In summing the market values within each category, if there is a matched position in the same security (i.e. both the issuer and issue are identical), the matching positions may be offset and omitted from the calculation of specific interest rate risk (refer to paragraphs 5, 35, 36 and 38 to 41 of Attachment B to APS 116).
Specific risk is to be assessed according to the classification of issuer of the security or underlying security in the case of derivative instruments. Issuers are classified into the categories of government, qualifying and other, as defined in paragraphs 6 to 10 of Attachment B to APS 116. Instruments with issuers in the government and qualifying categories should be further classified according to the residual term to final maturity of the security or underlying security.
Column 4. Specific risk-weight
The specific risk-weights applicable to each category are detailed in Table 1 of Attachment B to APS 116.
Column 5. Capital charge
Derived field calculated as column 3 Gross market value multiplied by column 4 Specific risk-weight.
Securitisation Exposures
Refer to APS 120 for the definition of ‘securitisation exposure’.
Columns 1 & 2. Short and Long Positions
The sum of the market values of individual securitisation positions in each issuer category should be reported in columns 1 and 2 for short and long positions, respectively. In summing the market values within each category, if there is a matched position in the same security (i.e. both the issuer and issue are identical), the matching positions may be offset and omitted from the calculation of specific interest rate risk (refer to paragraphs 5, 35, 36 and 38 to 41 of Attachment B to APS 116).
Columns 3 & 4. Capital charge (Short and Long Positions)
Specific risk-weights applicable to securitisation exposures are set out in paragraphs 12 and 13 and Tables 2, 3, 4 and 5 of Attachment B to APS 116. An ADI may apply different specific risk-weights in accordance with paragraphs 11 and 14 of Attachment B to APS 116. The capital charge is calculated as the position multiplied by the specific risk-weight. An ADI is permitted to limit the capital charge for an individual securitisation position to the maximum possible loss in accordance with the requirements of paragraph 19 of Attachment B to APS 116.
3. Resecuritisation Exposures
Refer to APS 120 for the definition of ‘resecuritisation exposure’.
Columns 1 & 2. Short and Long Positions
The sum of the market values of individual resecuritisation positions in each issuer category should be reported in columns 1 and 2 for short and long positions, respectively. In summing the market values within each category, if there is a matched position in the same security (i.e. both the issuer and issue are identical), the matching positions may be offset and omitted from the calculation of specific interest rate risk (refer to paragraphs 5, 35, 36 and 38 to 41 of Attachment B to APS 116).
Columns 3 & 4. Capital charge (Short and Long Positions)
Specific risk-weights applicable to resecuritisation exposures are set out in paragraphs 12 and 13 and Tables 2, 3, 4 and 5 of Attachment B to APS 116. An ADI may apply different specific risk-weights in accordance with paragraphs 11 and 14 of Attachment B to APS 116. The capital charge is calculated as the position multiplied by the specific risk-weight. An ADI is permitted to limit the capital charge for an individual securitisation position to the maximum possible loss in accordance with the requirements of paragraph 19 of Attachment B to APS 116.
4. Correlation Trading Portfolio
Columns 1 & 2. Short and Long Positions
The sum of the market values of individual positions in each issuer category should be reported in columns 1 and 2 for short and long positions, respectively. In summing the market values within each category, if there is a matched position in the same security (i.e. both the issuer and issue are identical), the matching positions may be offset and omitted from the calculation of specific interest rate risk (refer to paragraphs 5, 35, 36 and 38 to 41 of Attachment B to APS 116).
Columns 3 & 4. Capital Charge (Short and Long Positions)
The specific risk capital charge (for both short and long positions) should be calculated based on the positions underlying the correlation trading portfolio. These may include securitisation exposures, nth-to-default credit derivatives and other positions used to hedge the correlation trading portfolio.
Specific risk-weights applicable to securitisation exposures are set out in paragraphs 12 and 13 and Tables 2, 3, 4 and 5 of Attachment B to APS 116. An ADI may apply different specific risk-weights in accordance with paragraphs 11 and 14 of Attachment B to APS 116. The capital charge is calculated as the position multiplied by the specific risk-weight. An ADI is permitted to limit the capital charge for an individual securitisation position to the maximum possible loss in accordance with the requirements of paragraph 19 of Attachment B to APS 116.
Paragraph 17 of Attachment D to APS 116 details the capital treatment for nth-to-default credit derivatives. Any other positions used to hedge the correlation trading portfolio such as single name credit default swaps, credit indices or index tranches should be treated in a manner consistent with Attachment B and Attachment D to APS 116.
Column 5. Capital charge
Derived field calculated as the maximum of the sum of column 3 Capital charge short position and the sum of column 4 Capital charge long position. Both of these are derived fields under item 4.9 of the table.
Total capital charge
The sum of the subtotals from the specific risk capital charge for non-securitisation exposures (item 1.14) and the correlation trading portfolio (item 4.10), plus the sum of:
a) The capital charges (long positions) for securitisation and resecuritisation exposures; and
b) The capital charges (short positions) for securitisation and resecuritisation exposures.
In accordance with paragraph 18 of Attachment B to APS 116 an ADI may until 31 December 2013 apply the following alternative calculation for the total capital charge:
The sum of the subtotals from the specific risk capital charge for non-securitisation exposures and the correlation trading portfolio, plus the maximum of:
a) The sum of the capital charges (long positions) for securitisation and resecuritisation exposures; and
b) The sum of the capital charges (short positions) for securitisation and resecuritisation exposures.
This charge will also be captured under item 1.1.1 of the Market risk summary table.