Commodities

ADIs which use the simplified approach to calculate the capital charge for commodities risk should complete Table 5. ADIs which use the maturity ladder approach should complete Table 6.

All commodity positions, both on- and off-balance sheet, which are affected by changes in commodity prices should be included. This includes commodity forwards, commodity futures and commodity swaps. It also includes the delta-equivalent of commodity options (where the delta-plus method for options is used). Commodity derivatives should be converted into notional commodity positions according to the methods set out in paragraph 81 of AGN 113.3.

Each commodity position should first be expressed in terms of the standard unit of measurement (barrels, kilos, grams, etc) and then converted into Australian dollars using spot rates applying at the close of business on the reporting date (report the Australian dollar figure). If prior approval has been obtained from APRA, positions in foreign currency denominated commodities may be segmented into a commodity exposure and a foreign currency exposure.

The capital charge must be calculated separately for each commodity. Positions in different commodities may not, as a general rule, be offset (refer to paragraph 74 of AGN 113.3 for details of permissible offsetting).