Transcript QIS workshop presentation slides

QIS Industry Workshop
3 March 2010
Katrina Squires
Judy Lau
Kelly Yeung
Denis Gorey
Guy Eastwood
Anna Sofianaris
Michael Booth
1
Topics for the day
• Overview
• Definition of capital
• Leverage ratio
• Liquidity
• CCR and TB
• Smoothing MRC
• Securitisation
• Operational risk
• Wrap up
2
Overview
• Australian participants
• Activity to date
• Timetable
• Prioritisation of worksheets
• FAQ process
• Weekly progress reports
3
Australian participants
ANZ
Suncorp
CBA
CU Australia
NAB
Wide Bay
WBC
Heritage BS
Macquarie
Citibank
Bank of Queensland
HSBC
Bendigo and Adelaide Bank
4
Activity to date
•22 Dec:
draft spreadsheets for DefCap, DefCapTier1,
DefCapTier23 and Liquidity provided to advanced ADIs
•14 Jan:
draft workbook and instructions sent to all ADIs
•18 Feb:
final spreadsheets circulated
5
Timetable
• 25 March: QIS working group meeting
• 16 April: draft (core) spreadsheets to APRA
• 30 April: final (core) spreadsheets to APRA
• 17 May: submission to Secretariat
• 21 May: submission of TB, CCR, Securitisation, Ops Risk, Smoothing
MRC and supplementary liquidity worksheets to APRA
• 10-11 June: QIS working group meeting
• 14-15 July: preliminary analysis presented to the Basel Committee
• End 2010: finalisation of proposals
6
Prioritisation of worksheets
Spreadsheets required by 16 April (draft) and 30 April (final)
• Gen info (minimum 3 years (latest) for capital distribution data)
• Defcapcalc
• Defcap
• DefcapTier1
• DefcapTier23
• Leverage ratio (minimum 3 years (latest))
• Liquidity (Level 2)
7
Prioritisation of worksheets
Spreadsheets required by 21 May (final)
• CCR
• Securitisation
• OpRisk
• Smoothing MRC
• Liquidity (Level 1 data (only applicable to the four major banks)
separately for i) all Australian operations, ii) NZ banking subsidiary;
and iii) UK banking subsidiary)
8
Prioritisation of worksheets
Spreadsheets required by 21 May (final)
• TB
• TB securitisation
• TB correlation trading
• TB securitisation LSS
• TB correlation trading LSS
• TB securitisation wide
• TB correlation trading wide
9
Prioritisation of worksheets
N/A – no information required
• CCR memo
• DefcapcalcCOREP
10
FAQ process
• BIS FAQ (refer http://www.bis.org/bcbs/qis/index.htm)
• APRA FAQ (refer http://www.apra.gov.au/ADI/upload/APRA-FAQ.pdf)
• Bilateral responses
11
Weekly progress reports
Worksheets required by 30 April 2010
Date
Percentage of worksheet completed
Worksheet
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
General info
Defcap
DefcapTier1
DefcapTier23
Defcapcalc
Leverage ratio
Liquidity (Level 2)
12
Weekly progress reports
Worksheets required by 21 May 2010
Date
Percentage of worksheet completed
Worksheet
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Liquidity (Level 1)
TB
CCR
Securitisation
OpRisk
Smoothing MRC
TB securitisation
TB correlation trading
TB securitisation LSS
TB correlation trading LSS
TB securitisation wide
TB correlation trading wide
13
Definition of capital
Judy Lau
14
Background
Changes to capital framework aimed at raising:
• Quality
• Consistency
• Transparency
15
Quality
• Stricter requirements to qualify as Tier 1 capital
• Emphasis on tangible common equity
• Predominant Tier 1 to comprise common shares and retained
earnings
• Innovative hybrids phased out
• Tier 3 capital abolished
16
Consistency
• Regulatory adjustments harmonised
• Filters applied to predominant Tier 1
• Tier 2 capital harmonised
• Explicit minimum ratios for
– predominant Tier 1/risk-weighted assets
– Total Tier 1/risk-weighted assets
– Total capital/risk-weighted assets
17
Tier 1 Capital
Worksheet DefCapTier 1
• Column for each ‘group’ of instruments for which answers same
• All sections completed for each instrument ‘group’, except where
question is not applicable for Australia
• All Tier 1 capital instruments accounted for in worksheet
18
Current regulatory capital classification
• Tier 1 – unlimited inclusion
APRA Fundamental Tier 1 capital
• Tier 1 – limited inclusion but the limit exceeding 15%
APRA Non-innovative Residual Tier 1 capital
• Tier 1 – inclusion limited to 15% (or less)
APRA Innovative Tier 1 capital
19
Common equity
Only paid –up ordinary shares will qualify
Questions not applicable for Australia:
• Is the instrument capital under national law? (Row18)
• The paid-in amount is recognised as equity (ie not recognised as a
liability) for determining balance sheet insolvency. (Q9 under
Common Equity criteria)
20
Tier 1 additional going concern capital
• Existing instruments may not meet all criteria
• Innovative instruments ineligible
• No maturity date nor incentive to redeem
• Call options subject to strict governance arrangements
Q10 and Q11 relating to liabilities contributing to balance sheet
insolvency not applicable in Australia
21
Tier 2 capital
Worksheet DefCapTier 23
• Only one class of Tier 2 capital
• Eligibility comparable to APRA Lower Tier 2 capital
• No incentives to redeem
Questions on lock-in features not applicable in Australia
22
Assessing impact of capital proposal
Worksheet DefCap
• Regulatory adjustments reflect proposals in Consultative Document
• Variations to the baseline proposal for a number of items
• Completion on a “best-efforts” basis
23
Change in risk-weighted assets
• As a result of capital adjustments under the proposal
• Assets deducted from capital excluded from RWA
• Relevant where deductions not applicable in existing national rule
• Since all baseline adjustments are APRA deductions, no change
• Enter in ‘Other’ any current APRA deductions not required under
proposal
24
Paid in capital, reserves and AOCI
Total should equal APRA Fundamental Tier 1 capital
minus
minority interests
plus
Full value of asset revaluation reserves as defined
in Attachment B of APS111
25
Minority interest
Variations to identify:
• Amounts attributable to different types of capital instruments
• Total risk-weighted assets of the subsidiaries
• ‘Surplus’ capital in the subsidiaries
Follow instructions and complete on “best-efforts” basis
26
Unrealised gains and losses
Variations separately identify net unrealised gains (losses):
• on financial assets according to accounting classification and
fair value hierarchy
• on financial assets by fair value hierarchy and
regulatory banking book/trading book
• on property assets according to accounting treatment and
regulatory banking book/trading book
27
Goodwill and other intangibles
• Associated deferred tax liabilities entered as positive numbers
• Selected intangible items separately identified
• Further categorisation as detailed in instructions
28
Deferred tax assets
Netting of deferred tax assets and deferred tax liabilities per APRA rules
(refer Attachment D of APS 111)
Separately identify amounts whose realisation:
• depends on future profitability of the bank
• Do not rely on future profitability
Exclude from deferred tax liabilities amounts associated with goodwill
and intangibles
29
Investment in own shares
• Not relevant to the extent holdings are derecognised under IFRS
• Indirect investments have to be reported
• Report obligations to purchase or provide financing
30
Investments in the capital of banking,
financial and insurance entities
• Investments which have not been consolidated
• Distinguish holdings of common shares, other Tier 1 instruments
and Tier 2 instruments
• Five variations as detailed in instructions
31
Provisions and expected losses
Basel II IRB banks to provide details on
• Eligible provisions
• Expected losses
Standardised banks to provide data on provisions eligible
for inclusion in Tier 2 capital
32
Cash flow hedge reserves
Report total positive or (negative) value of cash flow hedge reserve
with breakdown into:
• Amount relating to the hedging of projected cash flows which are not
recognised on balance sheet
• Amount relating to the hedging of projected cash flows on assets
recognised but not fair valued on balance sheet
• Amount relating to the hedging of projected cash flows on liabilities
recognised but not fair valued on balance sheet
33
Gains and losses due to changes in
own credit risk
Report net gains and losses in equity due to changes in
bank’s own credit worthiness
Further split into:
• Amount relating to liabilities fair valued under fair value option
• Amount relating to liabilities fair valued due to their accounting
classification
34
Defined benefit pension fund assets
• Surplus in any ADI-sponsored defined benefit fund
• Separately report any surplus amount that the ADI has demonstrated
it has unrestricted and unfettered access to APRA’s satisfaction
• The risk-weighted amount of the assets that the ADI has unrestricted
and unfettered access
• Deficits in any ADI-sponsored defined benefit fund
35
Additional deductions
Separately identify the following items currently
deducted 50:50 from Tier 1 and Tier 2 capital:
•
•
•
•
•
Certain securitisation exposures
Securitisation gain on sale
Equity exposures under the PD/LGD approach
Non-payment/delivery on non-DvP and non-PvP transactions
Significant investments in commercial entities
36
Country specific calculation
Worksheet DefCap Calc
ARF 110
37
General info template
Eligible Capital and Regulatory Adjustments (Current Rules)
Asks for information on capital composition and regulatory deductions
under current rules
Amounts reported for Tier 1 capital, Tier 2 capital and total capital
should
match public/supervisory reports
Amounts eligible to meet the predominance test should equal
Fundamental Tier 1 capital
38
General info template
Capital distribution data
Relevant for consideration of capital conservation and countercyclical
capital buffers
Conserving capital to counter cyclicality
Distribution as percentage of earnings
Capital raisings
39
Discretionary bonus payments
• Discretionary
• Both in cash and/or shares
• Results in reduction in Total Tier 1 capital
• Net of tax
(Deduct any potential purchase from Investment in Own Shares)
40
Leverage ratio
Katrina Squires
41
Leverage ratio – general principles
High quality definition of (regulatory) capital
Exposure measure generally based on accounting treatment/valuation (on
balance sheet non-derivative items net of specific provisions and valuation
adjustments)
Securitisation exposures follow accounting treatment (underlying securitised
portfolios included in the leverage ratio for non-derecognised (accounting)
securitisations)
Consistent with a non-risk based approach, no recognition of credit risk
mitigants (collateral, guarantees, purchased credit protection)
No recognition of netting (gets around differences between IFRS and US GAAP
particularly for netting of derivatives and repos)
Two options for measuring the exposure for derivatives: sum of on balance sheet
positive fair values or additionally include the potential exposure using Basel II
current exposure method
Written credit derivatives included at notional value in the exposure measure
42
Leverage ratio – Panel A on-balance sheet items
end-2009
Sum of positive
fair values
(assume no
netting or CRM)
Accounting
balance sheet
value
Liquid assets
Originated and derecognised securitisations: total retained notes
Originated and derecognised securitisations: other exposures (eg drawn liquidity facilities)
Expected securitisations after the revision of accounting standard (ie treatment of QSPE in
FAS140), if applicable
Derivatives; of which:
OTC derivatives
Exchange traded derivatives
Derivatives; of which (alternative breakdown):
Credit derivatives (protection sold)
Credit derivatives (protection bought)
Foreign exchange and gold
Precious metals except gold
Interest rates
Equities
Other derivatives
Reverse repurchase agreements
Securities borrowing
Failed and unsettled transactions
Other assets; of which:
Interbank on-balance sheet exposures
Totals
Check: Sum of derivatives should be the same for both breakdowns
Yes
0
0
0
0
0
0
Value with Basel
II netting rules
0
Yes
43
Leverage ratio – Panel B derivatives and
off-balance sheet items
Regulatory
potential
exposure
(Current
exposure
method; assume
no netting or
CRM)
B1 ) Derivatives
Derivatives; of which:
OTC derivatives
Exchange traded derivatives
Derivatives; of which (alternative breakdown):
Credit derivatives (protection sold)
Credit derivatives (protection bought)
Foreign exchange and gold
Precious metals except gold
Interest rates
Equities
Other derivatives
B2) Off-balance sheet items
Originated securitisations: off-balance sheet exposures
undrawn liquidity facilities and other commitments related to derecognised securitisations
derecognised securitisations: total underlying assets
Off-balance sheet items with a 0% CCF in the RSA; of which:
credit cards
Off-balance sheet items with a 20% CCF in the RSA; of which:
loan commitment with original maturity ≤ 1 year
Off-balance sheet items with a 50% CCF in the RSA; of which:
OBS securitisation related exposures
loan commitments with an original maturity greater than 1 year
Off-balance sheet items with a 100% CCF in the RSA; of which:
OBS securitisation related exposures
direct credit substitutes (see para 83(i))
repurchase agreements and asset sales with recourse (see para 83(ii))
forward asset purchases, forward forward deposits and partly-paid shares and securities
(see para 84(i))
Totals
CCFs according to Basel I or Basel II?
Check: Sum of derivatives should be the same for both breakdowns
Notional amount
0
0
0
0
0
Yes
end-2009
Regulatory
potential
exposure
(Current
exposure
method; apply
Basel II netting
rules)
0
0
44
Yes
Leverage ratio – general issues
• Consolidation to be based on APRA’s definition of the Level 2
consolidated banking group (refer APS 110)
• Items deducted from capital (or risk weighted at 1250%) may be
deducted from the measure of exposure
• For pre-Basel II reporting periods (2007 and 2006) use Basel I
regulatory rules
• For pre-IFRS reporting periods use accounting rules in force at the
time
• Securitised assets:
– non-derecognised securitised portfolios/assets are to be recorded in Panel A
line item 26 in the ‘Other Assets’ category
– total underlying assets of derecognised portfolios/assets to be recorded in
Panel B line item 51 ‘Derecognised securitisations: total underlying assets’
45
Leverage ratio – general issues
• Panel A Line item 11 is not relevant for Australia, ie. ‘Expected
securitisations after the revision of accounting standard (ie treatment
of QSPE in FAS 140), if applicable’
• Availability of requested data: ‘best efforts’ basis
46
Leverage ratio – outstanding issues
Calibration – how much?
Pillar 1 or Pillar 2 or Pillar 3?
Pillar 3 disclosures
47
Liquidity
Kelly Yeung
48
Presentation outline
• Background of the liquidity QIS
• “Walk-through” the QIS liquidity worksheet
• Questions and answers
49
Background
International framework for liquidity risk measurement, standards and
monitoring, BCBS consultative document December 2009
• Proposing a global quantitative framework for liquidity risk supervision
• Objectives
-
Strengthen banks’ resilience to liquidity stress
-
Promote stronger liquidity buffers (quantity and quality) at banks
-
Enhance international harmonisation of liquidity risk supervision
50
Background (cont’d)
• Propose two global quantitative liquidity standards (regulatory metrics)
-
Liquidity Coverage Ratio (LCR)
i) Promote short-term resiliency of banks’ liquidity risk profiles
ii) Ensure banks have sufficient high quality liquid resources to survive an
acute stress scenario lasting for one month
-
Net Stable Funding Ratio (NSFR)
i) Promote banks’ resiliency over longer-term time horizons
ii) Establish a minimum acceptable amount of stable funding for a bank’s
assets and off-balance sheet activities over a one year horizon
51
Background (cont’d)
Purpose of the liquidity QIS
• Gather relevant data to assess the impact of the two regulatory
metrics on banks
-
LCR: Analyse the trade-offs between the severity of the stress scenario and
the minimum levels of liquidity to be held by banks
-
NSFR: Analyse the impact of the minimum amount of stable funding required
of banks to support relevant assets and business activities
• QIS results will be used to recalibrate the parameters of the two
regulatory metrics and for considering other possible options
-
Ensure these regulatory metrics create strong incentives for banks to
maintain prudent funding liquidity profiles while minimise negative impact
on the financial system and broader economy
52
Background (cont’d)
QIS liquidity worksheet
• Capture relevant data for the LCR and NSFR measures
-
Data in line with the liquidity consultative document
-
A few areas with additional granularity for further analysis
-
Mainly involves reporting of outstanding balances of on- and off-balance
sheet assets and liabilities
53
QIS liquidity worksheet
General information
• Basis of reporting: Level 2 consolidated group
• Reporting period: end-Sept 2009 or end-Dec 2009 (must be consistent
with other worksheets)
• Reporting currency: AUD (all foreign currency amounts should be
converted into AUD using the exchange rate applicable at the
reporting date)
54
QIS liquidity worksheet (cont’d)
General information (cont’d)
• Additional data requirements for the four major banks
-
Provide separate equivalent data for Australia, New Zealand and UK
i) Australia: all ADIs and their overseas branches
ii) NZ: NZ banking subsidiaries (basis of reporting in line with RBNZ’s
requirements)
(Note: Seek institution’s consent to share the NZ data with RBNZ)
iii) UK: UK banking subsidiaries (basis of reporting in line with the FSA’s
requirements)
55
QIS liquidity worksheet (cont’d)
General information (cont’d)
-
Solo data collected for APRA’s own analysis and will not be sent to BCBS
-
Required solo data to be submitted by 21 May 2010
-
Submit a separate worksheet for reporting all those solo data (use separate
column for reporting Australia, NZ and UK data)
Liquidity
Entity
Consolidated
1
2
3
Amount
Amount
Amount
A) Liquid assets, liquidity coverage ratio (LCR)
1) Narrow buffer assets
Amount
Cash
Central bank reserves
Securities with a zero risk weight
issued by sovereigns
guaranteed by sovereigns
issued or guaranteed by central banks
issued or guaranteed by non-central government PSEs
issued or guaranteed by other institutions
Government or central bank debt issued in domestic currency of bank's home country or in the country where the liquidity risk is
taken
Haircut
end-2009 end-2008
56
QIS liquidity worksheet (cont’d)
General information (cont’d)
-
Reporting period: end-Sept 2009 or end-Dec 2009 (must be consistent with
the Level 2 data)
-
Reporting currency: AUD (all foreign currency amounts should be converted
into AUD using the exchange rate applicable at the reporting date)
57
QIS liquidity worksheet (cont’d)
Specific instructions
• Panels A and B: capture relevant data relating to the LCR measure
LCR:
Stock of high quality liquid assets
Net cash outflows over a 30-day time period
≥ 100%
• Panel A deals with internal estimates of liquid assets (i.e. the numerator
of the LCR)
• Panel B deals with net cash outflows (i.e. the denominator of the LCR)
58
QIS liquidity worksheet (cont’d)
Panel A: Liquid assets
• Panel A1 Narrow buffer assets
-
In line with the proposed narrow definition of liquid assets set out in the
BCBS liquidity consultative document
-
Report ESA balances under line item 10 “Central bank reserves”
1) Narrow buffer assets
Amount
Haircut
end-2009 end-2008
Amount
Amount
Amount
Cash
Central bank reserves
Securities with a zero risk weight
issued by sovereigns
guaranteed by sovereigns
issued or guaranteed by central banks
issued or guaranteed by non-central government PSEs
issued or guaranteed by other institutions
Government or central bank debt issued in domestic currency of bank's home country or in the country where the liquidity risk is
taken
59
QIS liquidity worksheet (cont’d)
• Panel A2 Additional assets
-
Gather additional data for consideration of possible expansion of liquid assets
definition
-
Analyse whether these assets should be included in a broader definition of
liquid assets
2) Additional assets
Amount
Haircut
end-2009 end-2008
Amount
Amount
Amount
Non-financial corporate bonds
rated AA or better
rated A- up to AACovered bonds, not self-issued
rated AA or better
rated A- up to AASecurities issued by sovereigns with a 20% risk weight
Securities directly issued by non-central government PSEs (20% risk weight)
secured
unsecured
Securities guaranteed by non-central government PSEs (20% risk weight)
60
QIS liquidity worksheet (cont’d)
• All assets reported under Panel A must be unencumbered and freely
available for the next 30 days
-
Any of the assets listed under Panel A received by the ADI as collateral (e.g.
under reverse repos) can only be included if they remain at the ADI’s disposal
throughout the 30-day time period
• All assets reported under Panel A must be central bank-eligible and
cannot be issued by a bank, investment firm or insurance firm
• Once included in Panel A, those assets cannot be reported as cash
inflows under Panel B2 to avoid double counting
• All securities should be reported at market value
61
QIS liquidity worksheet (cont’d)
• Columns D and E: Provide internal estimates of average observed
market haircuts for which the ADI’s own transactions secured by
collateral of the corresponding asset-row line item occurred
-
“average observed market haircuts as of the latest calendar date of the year
stated” — this should be end-Sept 2008 and end-Sept 2009 if the reporting
period is end-Sept 2009
1) Narrow buffer assets
Amount
Haircut
end-2009
end-2008
Amount
Haircut
end-2009
end-2008
Cash
Central bank reserves
Securities with a zero risk weight
issued by sovereigns
guaranteed by sovereigns
issued or guaranteed by central banks
issued or guaranteed by non-central government PSEs
issued or guaranteed by other institutions
Government or central bank debt issued in domestic currency of bank's home country or in the country where the liquidity risk is
taken
2) Additional assets
Non-financial corporate bonds
rated AA or better
rated A- up to AACovered bonds, not self-issued
rated AA or better
rated A- up to AASecurities issued by sovereigns with a 20% risk weight
Securities directly issued by non-central government PSEs (20% risk weight)
secured
unsecured
Securities guaranteed by non-central government PSEs (20% risk weight)
62
QIS liquidity worksheet (cont’d)
• Haircut for central bank reserves: leave blank if inapplicable
• Can ADIs use central bank haircuts for “narrow buffer assets”?
63
QIS liquidity worksheet (cont’d)
Panel B: Net cash outflows
Panel B1 Cash outflows
• Capture outstanding liabilities that fall due within the 30-day window
• Include term deposits where withdrawal penalty is no greater than
the loss of interest
64
QIS liquidity worksheet (cont’d)
• Panels B1a Retail deposit cash outflows and B1b Unsecured wholesale
cash outflows
B) Net cash outflows, liquidity coverage ratio (LCR)
1) Cash outflows
a) Retail deposit cash outflows
Total retail deposits; of which:
Insured retail deposits; of which:
in transactional or relationship based accounts
in non-transactional and non-relationship based accounts
Check: Sum should be equal to the total insured retail deposits
Uninsured retail deposits; of which:
in transactional or relationship based accounts
in non-transactional and non-relationship based accounts
Check: Sum should be equal to the total uninsured retail deposits
Check: Sum should be equal to the total retail deposits
Amount
Amount
Amount
Amount
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Amount
Amount
Amount
Amount
Yes
Yes
Yes
Yes
b) Unsecured wholesale cash outflows
Total unsecured wholesale funding
Total SMEs; of which
insured deposits in transactional or relationship based accounts
insured deposits in non-transactional and non-relationship based accounts
uninsured deposits in transactional or relationship based accounts
uninsured deposits in non-transactional and non-relationship based accounts
Total non-financial corporates; of which:
with operational relationships
with opertional relationships and fully covered by deposit insurance
without an operational relationship
Financial institutions
Total sovereigns, central banks and PSEs; of which:
with operational relationships
with operational relationships and fully covered by deposit insurance
without operational relationships
Any other entities not already identified in the above unsecured wholesale cash outflows categories
Own debt maturing in ≤ 30 days
Any other cash outflows not included in sections 1a, b, c, d, or e, including principal and interest due and derivative payables
Check: Sum should be less than or equal to the total unsecured wholesale funding
65
QIS liquidity worksheet (cont’d)
-
The QIS requires retail deposits and certain unsecured wholesale funding to
be split by ‘transactional or relationship’ and ‘operational relationships’
i) The required data to be provided on a best-effort basis
ii) Where data is not available, ADIs can provide estimates
iii) Any assumptions used in making such estimates should be included in the
qualitative document
iv) The QIS instructions provide some guidance on transactional and
relationship based accounts and on operational relationships
66
QIS liquidity worksheet (cont’d)
• Panel B1c Secured funding cash outflow (due to failure to roll secured
funding)
-
Report outstanding amount of secured funding / repo transactions that will
mature ≤ 30 days and are backed by relevant underlying assets (which mirror
those assets under Panel A)
c) Secured funding cash outflow (due to failure to roll secured funding)
Amount
Amount
Amount
Amount
Overnight borrowings from central banks
Other borrowings from central banks with remaining maturity of 30 days or less
Transactions backed by:
Securities with a zero risk weight, issued by sovereigns
Securities with a zero risk weight, guaranteed by sovereigns
Securities with a zero risk weight, issued or guaranteed by central banks
Securities with a zero risk weight, issued or guaranteed by non-central government PSEs
Securities with a zero risk weight, issued or guaranteed by other institutions
Government or central bank debt issued in domestic currency of bank's home country or in country where the liquidity risk is taken
Non-financial corporate bonds
rated AA or better
rated A- up to AAEquities of non-financial entities listed on major index in recognised exchange
Covered bonds, not self-issued
rated AA or better
rated A- up to AASecurities issued by sovereigns with a 20% risk weight
Securities directly issued by non-central government PSEs (20 % risk weight)
secured
unsecured
Securities guaranteed by non-central government PSEs (20% risk weight)
All other assets
67
QIS liquidity worksheet (cont’d)
• Panel B1d Additional requirements
-
Report off-balance sheet items that may give rise to cash outflows in the
next 30 days due to contractual obligations
d) Additional requirements
Amount
Amount
Amount
Amount
Additional collateral that would need to be posted for short term financing transactions, derivatives and other contracts, due to a
downgrade of up to three notches from current rating
Estimated outflows due to valuation changes on derivatives
Potential liquidity exposure
Largest 30 day net outflow over the past 18 months related to these valuation changes
Outstanding amount of collateral posted for derivative transactions
Cash and assets as defined in panel A1
For collateral other than the assets described in panel A1
ABCP, conduits, SIVs and other financial facilities
Maturing short-term debt
Maturing longer-term debt, or non-maturing debt with embedded options
Amount of assets related to ABCP, conduits, SIVs and other financial facilities which could contractually be "returned" to the bank
Term ABS, covered bonds and other structured financing instruments not covered above – all maturing portions
Undrawn committed credit facilities to non-financial corporates
Undrawn committed liquidity facilities to non-financial corporates
Undrawn committed credit and liquidity facilities to…
retail clients
financial institutions
sovereigns, central banks or any other entity not included in other drawdown categories (not including intra-group facilities)
68
QIS liquidity worksheet (cont’d)
-
Estimate potential liquidity exposure (outflows) in the next 30 days due to
valuation changes on derivatives (line item 96)
i) The assumptions used in making such estimate should be included in the
qualitative document
69
QIS liquidity worksheet (cont’d)
• Panel B1e Other cash outflows — non liquidity stress, non contractual
triggers and other
-
Other contingent funding obligations (line item 121)
i) An estimate of cash outflows associated with other contingent funding
obligations occurring in 30 days or less
ii) The assumptions used in making such estimate should be included in the
qualitative document
e) Other cash outflows – non liquidity stress, non contractual triggers and other
Amount
Amount
Amount
Amount
Unconditionally revocable "uncommitted" credit and liquidity facilities
Guarantees
Letters of credit
Other trade finance instruments
Total amount outstanding of sponsored transactions, including conduits, SIVs, money market mutual funds and other such financing
facilities
For banks with an affiliated broker dealer, amount of outstanding own debt securities with maturities beyond 30 days
Other contingent funding obligations
Any other cash outflows not included above, including principal and interest due and derivative payables
70
QIS liquidity worksheet (cont’d)
-
Any other cash outflows not included above (line item 122)
i) This item may conflict with line item 66
ii) In any case, avoid double counting
71
QIS liquidity worksheet (cont’d)
Panel B2 Cash inflows
• Report expected contractual cash inflows over the next 30 days
• Panel B2b Wholesale unsecured and other
-
Include lending exposures in the form of holdings of debt securities issued by
those entities
i) If those securities have already been included in Panel A (e.g. nonfinancial corporate bonds), then they should not be included in Panel B2b
in order to avoid double counting
b) Wholesale unsecured and other
Amount
Amount
Amount
Amount
Contractual inflows from fully performing loans to…
SMEs
non-financial corporates
financial institutions
other entities
Contractual inflows related to ABCP, conduits, SIVs and other such financing facilities
Own account, performing security cash flows (maturities and forward purchase/sales)
Undrawn committed credit and liquidity facilities extended to the bank
Deposits held at other financial institutions
Other cash inflows, including contractual receivables from derivatives
72
QIS liquidity worksheet (cont’d)
ii) Otherwise, include contractual inflows arising from these securities (e.g.
principal amount and/or interest received) in the next 30 days
73
QIS liquidity worksheet (cont’d)
• Panel B2c Secured lending / reverse repo cash inflow
-
Report cash inflows arising from secured lending / reverse repo transactions
that mature in 30 days or less
-
The underlying collateral should not be included as assets under Panel A
c) Secured funding/reverse repo cash inflow
Amount
Amount
Amount
Amount
Reverse repo and other secured funding transactions backed by
Securities issued by sovereigns with a zero risk weight
Securities guaranteed by sovereigns with a zero risk weight
Securities issued or guaranteed by central banks with a zero risk weight
Securities issued or guaranteed by non-central government PSEs with a zero risk weight
Securities issued or guaranteed by other institutions with a zero risk weight
Government or central bank debt issued in domestic currency of bank's home country or in the country where the liquidity risk is
Non-financial corporate bonds
rated AA or better
rated A- up to AAEquities of non-financial entities listed on major index in recognised exchange
Covered bonds, not self-issued
rated AA or better
rated A- up to AASecurities issued by sovereigns with a 20% risk weight
Securities directly issued by non-central government PSEs (20% risk weight)
secured
unsecured
Securities guaranteed by non-central government PSEs (20% risk weight)
All other assets
74
QIS liquidity worksheet (cont’d)
Panel B3 Memo items for banks submitting legal entity information
• Only applicable to the four major banks
• Report separately intra-group flows between Australia / NZ / UK
banking operations and other group entities
• Report separately undrawn committed credit and liquidity facilities
provided by Australia / NZ / UK banking operations to other group
members and vice versa
3) Memo items for banks submitting legal entity information
Amount
Amount
Amount
Amount
Intra group cash inflows – maturing ≤ 1 month
Intra group cash outflows – maturing ≤ 1 month
Intra group – undrawn committed credit and liquidity facilities provided by other group members
Intra group – undrawn committed credit and liquidity facilities provided to other group members
75
QIS liquidity worksheet (cont’d)
Specific instructions (cont’d)
• Panels C and D: capture relevant data relating to the NSFR measure
NSFR:
Available amount of stable funding
Required amount of stable funding
> 100%
• Panel C deals with sources of available stable funding (i.e. the
numerator of the NSFR)
• Panel D deals with required (uses of) stable funding (i.e. the
denominator of the NSFR)
76
QIS liquidity worksheet (cont’d)
Panel C: Available stable funding
• Breakdown of various categories of outstanding liabilities with
maturities:
-
< 1 year
≥ 1 year
• Further breakdown of liabilities with maturities < 1 year by time
buckets of:
-
< 3 months
≥ 3 months to < 6 months
≥ 6 months to < 12 months
77
QIS liquidity worksheet (cont’d)
Panel D: Required stable funding
• Breakdown of various categories of assets (e.g. loans, securities, etc)
with maturities:
-
< 1 year
≥ 1 year
• Undrawn committed credit and liquidity facilities to fiduciaries (line
items 256 and 257)
-
Errors in the QIS instructions (make reference to fiduciaries in both line
items)
-
Will clarify with the BCBS QIS Working Group
78
QIS liquidity worksheet (cont’d)
• Other contingent funding obligations (line item 261)
-
An estimate
-
The assumptions used in making such estimate should be included in the
qualitative document
79
Counterparty credit risk
and trading book
Denis Gorey
80
Agenda
Trading Book
•
•
•
•
General comments
“TB” tab
“TB Securitisation” tabs
“TB Correlation” tabs
Counterparty Credit Risk
• General comments
• “General Info” tab
• “CCR” tab
81
Agenda
Trading Book
•
•
•
•
General comments
“TB” tab
“TB Securitisation” tabs
“TB Correlation” tabs
Counterparty Credit Risk
• General comments
• “General Info” tab
• “CCR” tab
82
Trading Book
– Market Risk rules apply to Trading Book AND FX and Commodity
exposures in Banking Book
– The QIS is capturing impact of changes as per draft APS 116
(December 2009)
– Not all of QIS applies:
• “TB” Section B and “TB Securitisation” Section 1b apply only to
ADIs who model interest rate specific risk
• “TB Correlation Trading” tabs apply only to ADIs who have a
correlation trading portfolio so should not apply – if you have a
different view then happy to discuss
– The instructions for TB are reasonably straightforward
83
Trading Book
• General comments
• “TB” tab
– Equity specific risk: Section A
– Stressed VaR: Section B
• “TB Securitisation” tabs
84
Section A: Equity specific risk
• Zero unless:
–
You have equity exposures subject to the standard method for equity specific
risk
AND
– Some of these are subject to a 4% charge under paragraph 36 of Attachment B
to APS 116 due to their classification as being both liquid and well-diversified
(as would be reported in Column 2 of ARF_116_0_3)
85
Trading Book
• General comments
• “TB” tab
– Equity specific risk
– Stressed VaR
• “TB Securitisation” tabs
86
Section B: Stressed VaR
• Stressed VaR contribution
– Stressed VaR observation period must be exactly one year
– The draft standard says “from a continuous 12 month period of significant
financial stress relevant to the ADI‟s portfolio”. I suggest for QIS purposes: any
12 month period which includes all of the last quarter of 2008 should suffice
• Non-stressed VaR observation period
– Ideally ending 31 Dec 2006 – is this feasible? If not then let’s discuss (the fallback is a choice of period that doesn’t include the GFC)
– No specification of length of period (but must be at least a year)
– Need to supply a description of approach used in an accompanying document
87
Trading Book
• General comments
• “TB” tab
– Equity specific risk
– Stressed VaR
• “TB Securitisation” tabs
88
“TB Securitisation” tabs
• Should be relatively straightforward
• “Re-securitisation” as defined in the draft APS 120
• “10 most relevant instrument types” – classify in the same way as for the
“Securitisation “ tab
89
Agenda
Trading Book
•
•
•
•
General comments
“TB” tab
“TB Securitisation” tabs
“TB Correlation” tabs
Counterparty Credit Risk
• General comments
• “General Info” tab
• “CCR” tab
90
Counterparty Credit Risk
– CCR rules calculate a loan equivalent Exposure at Default (EAD) for
OTC derivatives, repos, stock lending and borrowing and other
securities financing transactions (SFTs) but Section E of “CCR” tab
also applies to loan activity
– Under Basel framework: 3 ways of calculating EAD
•
•
•
Current exposure method (currently used)
Standardised method
Internal Model Method
– QIS generally focuses on IMM – so much doesn’t apply
•
•
Sections A1, B2, C, D, and G of “CCR” tab do not apply
Focus only on sections A2, B1, E and F of “CCR” tab
91
Counterparty Credit Risk
• General comments
• “General Info” tab – current CCR capital – should be straightforward
• “CCR” tab
–
–
–
–
CVA loss charge
Asset value correlation
Central counterparties
Impact summary
92
Counterparty Credit Risk
• General comments
• “General Info” tab
• “CCR” tab
–
–
–
–
CVA loss charge: Section B1
Asset value correlation: Section E
Central counterparties: Section F
Impact summary: Section A2
93
Section B1: CVA charge
• Bond equivalent CVA charge
First step: determine EAD (as done currently, APS112)
Second step: determine Effective Maturity
For each instrument in a netting set, Effective Maturity is calculated in
accordance with the calculation of M in paragraphs 33-34 or attachment B to
APS 113 (either weighted by cash-flows or, more conservatively, notional
maturity) except that:
• To calculate the CVA capital charge, the maturity M to use in the
subsequent calculations is the longest Effective Maturity (as calculated
above) across all netting sets with the counterparty.
•
It should not be capped at five years, since CVA is the lifetime discounted
expected loss of the counterparty.
94
Section B1: CVA charge
• Bond equivalent CVA charge
Third step: obtain a CDS spread for the counterparty
• The spread used to calculate the CVA of the counterparty should be used.
•
If a CDS spread or bond spread is available for the counterparty use this
•
If no CDS or bond spread is available for the counterparty, then map the
counterparty to a generic spread curve, for example by rating, industry and
country.
• This curve provides the spread that should be used in the calculation of the bondequivalent CVA capital charge.
• If the bank has to make approximations or extrapolations for some tenors of the
CDS spread curve when determining the CVA, these same extrapolated CDS spread
tenors should be used in the calculation of the bond-equivalent capital charge.
• For the capital charge, only one tenor is needed: the tenor corresponding to the
Effective Maturity determined in Step 2.
95
Section B1: CVA charge
• Bond equivalent CVA charge
Fourth step: determine the market risk charge for CVA
This is an approximation for the CVA of a counterparty with
• expected exposure on average equal to EAD
• effective maturity equal to M
• annualized CDS spread at the tenor M equal to s
• r is the annualized risk-free interest rate
Note that the PV is negative, which reflects the fact that CVAs are subtracted
from the counterparty-risk-free value of derivatives to obtain fair value.
96
Section B1: CVA charge
• Bond equivalent CVA charge
Fourth step (a): determine the market risk charge for CVA
Calculate charge twice:
• (1) once using exposure as shown on previous slide
• (2) second time using EAD
For both calculations:
• Total market risk charge = Interest rate specific risk charge + Interest rate general
market risk change (both calculated according to Attachment B to APS 116)
• CVA charge = total market risk charge x 5
• RWA for CVA = CVA charge x 12.5
(risk weight of 8% to be used)
ADIs are NOT required to calculate internal model numbers (as they use SMM for
interest rate specific risk), but happy to discuss this.
97
Section B1: CVA charge
• Stylised VaR CVA charge

CEM CVA addon  0.7    LGDi  PDi

i 
 C


    notional  CCF   8  MTM  


 c

•
c denotes the different product types and CCF is the notional conversion
factor applicable to the product type.
•
LGDi is loss given default of the counterparty corresponding to netting set i.
•
PDi is the probability of default of the counterparty corresponding to netting
set i.
•
MtM is the current mark to market value of the netting set
98
Section B1: CVA charge
• Rows 52 to 57: Impact of CVA on EL and EAD? Will be seeking more
clarification from Basel
• Rows 62 to 65: Do not complete Column I
99
Counterparty Credit Risk
• General comments
• “General Info” tab
• “CCR” tab
–
–
–
–
CVA loss charge: Section B1
Asset value correlation: Section E
Central counterparties: Section F
Impact summary: Section A2
100
Section E: Asset Value Correlation
• Apply 1.25x multiplier to AVC for exposures to “Financial Counterparties” (i.e. 1224% range becomes 15%-30%)
• Broad definition include:
•
Regulated banks and non-banks (subject to a threshold, with two thresholds
investigated), and
•
unregulated Financial Institutions and other financial intermediaries (e.g. highly
levered entities)
• AVC increase applies to all exposures to Financial Counterparties (e.g. loans) – not
just CCR
• Awaiting Basel guidance/ clarification on calculation of threshold, in particular:
• Individual counterparties or consolidated group
• Definition of regulated
• Which unregulated entities are to be included
• Definition of “highly leveraged”
101
Counterparty Credit Risk
• General comments
• “General Info” tab
• “CCR” tab
–
–
–
–
CVA loss charge: Section B1
Asset value correlation: Section E
Central counterparties: Section F – should be straightforward
Impact summary: Section A2
102
Counterparty Credit Risk
• General comments
• “General Info” tab
• “CCR” tab
–
–
–
–
CVA loss charge: Section B1
Asset value correlation: Section E
Central counterparties: Section F
Impact summary: Section A2 – should be straightforward
103
Smoothing minimum required
capital (procyclicality)
Guy Eastwood
104
Smoothing MRC
• Cyclicality of minimum capital requirements (MRC) is one aspect of
the wider issue of procyclical behaviour within the financial system
• BII Framework, as well as being more risk sensitive (particularly IRB),
is also more cyclical
• Cyclicality issues, in part, influenced the design of the BII Framework
(eg IRB risk weighting functions, stress test requirements)
• Basel Committee is now considering whether additional measures
should be introduced to deal with cyclicality of MRC, eg more formal
means of building up capital buffers in good times & allowing access
in downturns (smoothing MRC)
• Difficult issue in practice. QIS aims to help inform discussion on the
need for additional measures in this area, their potential magnitude &
mechanics of operation
105
Smoothing MRC
The portfolio-level PD at time t is calculated as the average of
assigned grade PDs weighted by the number of counterparties
in each grade.
k
 PD
g
Ng
g 1
k

Ng
g 1
The portfolio-level PD changes over the cycle as the result of
the migration of borrowers across grades and possible changes
of grade PD. At any particular point in time, a scaling factor
could be determined by comparing this portfolio-level PD to
some PD benchmark.
106
Smoothing MRC
•
The Basel Committee is interested in collecting information on two
possible benchmarks:
–
–
•
Option A: the long-term average portfolio PD over a given time period (the
reference period);
Option B: the downturn PD, ie the highest PD over a given time period.
For each IRB portfolio (or sub-portfolio), two alternative scaling
factors can be calculated:
–
–
Scaling factor A: ratio of the long-term average PD to current PD. This
scaling factor can be greater or lower than 1 depending on the stage of the
credit cycle.
Scaling factor B: ratio of the downturn PD to current PD. This scaling factor
is expected to be greater than 1 at all times but downturn periods.
107
Smoothing MRC
Steps:
• For each rating grade, the scaling factors can used to adjust current
grade PDs.
•
For each grade, a capital buffer can then be determined as the
difference between the amount of capital computed using the current
PD and the amount computed using the PD adjusted with either scaling
factor A or scaling factor B.
•
For each portfolio, the overall buffer would the sum of grade-level
buffers using one or the other scaling factor:
–
The buffer would increase in expansion and decrease in recession, according to
the path followed by PDs:
– Under Option A, the idea is that portfolio-level PDs estimated through a
point-in-time rating system would be transformed into something like
through-the-cycle PDs;
– Under Option B, portfolio-level PDs would be transformed into recessionary
PDs incorporating the impact of stressed conditions.
108
Smoothing MRC
DT PD MRC
LR PD MRC
B2 MRC
Recession
Expansion
109
Smoothing MRC worksheet
Main features:
•
Only for IRB banks
•
Scaling information requested only for IRB portfolio subject to a
PD/LGD approach
•
4 dates: 2006-2009  time-dynamics is crucial
•
Best effort basis for the calculation of downturn and long-term PD but
banks should be encouraged to provide estimates based on
sufficiently long-time series
110
Smoothing MRC worksheet
Data on exposures
Columns F and G
IRB exposure
pre-CCF and
pre-CRM
Total corporate (not including receivables); of which:
Corporate (not including SMEs, specialised lending and receivables)
Other SL
SL HVCRE
SME treated as corporate
Unassigned
Sovereign
Bank
Retail; of which:
Residential mortgages
Other retail
Qualifying revolving retail exposures
Unassigned
Equity: PD/LGD approach
Purchased receivables
Total IRB perimeter
Total banking book
post-CCF and
post-CRM
No distinction between
drawn, undrawn and
other off-balance sheet
items. Only nondefaulted exposures
should be included.
WHY ARE WE ASKING
THIS?
To assess the share of
portfolios subject to
PD/LGD approach as a
percentage of total
banking book and IRB
portfolios
111
Smoothing MRC worksheet
Data on PDs (1/2)  These are the most important data
Columns H, I and J
PD
Current
Total corporate (not including receivables); of which:
Corporate (not including SMEs, specialised lending and receivables)
Other SL
SL HVCRE
SME treated as corporate
Unassigned
Sovereign
Bank
Retail; of which:
Residential mortgages
Other retail
Qualifying revolving retail exposures
Unassigned
Equity: PD/LGD approach
Purchased receivables
k
 PD
g
Ng
Long term
avg
Downturn
Only non-defaulted
exposures should be
included.
WHY ARE WE ASKING
THIS?
Data on PDs are the
main input of the
approach.
The quality of the
estimates for downturn
and LT PDs affects the
quality of the whole
exercise
g 1
k

g 1
Ng
112
Smoothing MRC worksheet
Data on PDs (2/2): an example
Bank A does have time series on PDs for 10 years, for each regulatory portfolio.
For the corporate portfolio data are as follows:
k
 PD
g
Ng
g 1
k

g 1
Ng
YEAR
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
LT PD (mean 2000-09)
DT PD (max 2000-09)
PD
0.01
0.03
0.05
0.06
0.04
0.02
0.03
0.04
0.06
0.09
0.043
0.09
Following
steps:
1) Scaling
factor at the
portfolio level
current PD for 2006
current PD for 2007
current PD for 2008
current PD for 2009
2) Applied at
each grade PD
3) Rescaled
grade PD used
for determining
grade RWAs
113
Smoothing MRC worksheet
Data on RWAs
Columns K, L and M
Risk-weighted assets
Current
Long term avg
Downturn
Total corporate (not including receivables); of which:
Corporate (not including SMEs, specialised lending and receivables)
Other SL
SL HVCRE
SME treated as corporate
Unassigned
Sovereign
Bank
Retail; of which:
Residential mortgages
Other retail
Qualifying revolving retail exposures
Unassigned
Equity: PD/LGD approach
Purchased receivables
For each reference date use that year’s current & rescaled
PDs but 2009 data for all other inputs into the RWA
calculations
Only nondefaulted
exposures should
be included.
WHY ARE WE
ASKING THIS?
RWAs are used for
calculating the
buffers.
They are to be
computed at the
grade level and
then aggregated to
the portfolio level
114
Smoothing MRC worksheet
Info on time series-used
Columns C, D and E
Time span for
calculation of PD long
term avg and PD
Ref year for
downturn
the PD
Start year
End year
downturn
Total corporate (not including receivables); of which:
Corporate (not including SMEs, specialised lending and receivables)
Other SL
SL HVCRE
SME treated as corporate
Unassigned
Sovereign
Bank
Retail; of which:
Residential mortgages
Other retail
Qualifying revolving retail exposures
Unassigned
Equity: PD/LGD approach
Purchased receivables
Following the previous example, bank A would indicate for the
corporate portfolio: 2000 as start year, 2009 as end year and
2009 as the reference year for DT PD
WHY ARE WE ASKING
THIS?
The QIS instructions
ask banks to use
sufficiently long time
series, but do not
predefine a
minimum no of
years.
It is thus important
to know what banks
actually did.
115
Smoothing MRC worksheet
Embedded formulae:
Data on the scaling factors and the capital buffers
Scaling factor
A
B
1) To get info on the
magnitude of the
“cyclicality” of MRC
Capital buffers
A
WHY DO WE
COMPUTE THIS?
B
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
2) To quantify the
amount of capital
buffers needed to
absorb MRC
fluctuations
116
Smoothing MRC worksheet
Memo items: Provisions and EL
Total eligible provisions
Only non-defaulted
exposures should
be included.
0
Columns N, O and P
WHY ARE WE
ASKING THIS?
EL
Current
Total corporate (not including receivables); of which:
Corporate (not including SMEs, specialised lending and receivables)
Other SL
SL HVCRE
SME treated as corporate
Unassigned
Sovereign
Bank
Retail; of which:
Residential mortgages
Other retail
Qualifying revolving retail exposures
Unassigned
Equity: PD/LGD approach
Purchased receivables
Long term avg
Downturn
To have some
preliminary
evidence on the
impact on the
numerator (via
regulatory
calculation
difference) + some
info for dynamic
provisions
117
Concluding remarks
• Having an annual PD series of reasonable length and quality is crucial
to gain anything meaningful from this part of the QIS
– this will require professional judgment in developing back estimates of PD and
determining how far back to go … BUT we’re not insisting on precision here,
just something reasonable to be working with
– interested in hearing at an early stage how respondents might intend to do
this. Is there value in us all getting together to discuss way(s) forward?
• Also our thought is that use of 2009 inputs into the RWA calculations
(except for PD) for all reference dates should make the data
gathering/calculation burden much less. Do respondents agree? Are
respondents clear on what has been asked for or are there
issues/complications that we might not be seeing? Again, is there
value in meeting on an industry basis to discuss?
QUESTIONS/COMMENTS?
118
Securitisation
Anna Sofianaris
119
Securitisation
• “Current” columns completed in accordance with APS 120 Securitisation
(January 2008)
• “New” columns completed in accordance with draft APS 120
Securitisation (December 2009)
• Exposure amounts reported:
-
after application of credit conversion factors
without recognition of any cap or provisions/value adjustments
• Exclude deductions for gain-on-sale
• Exclude exposures in the trading book
• Exclude modifications to APS 120 reflecting additional APRA proposals
(i.e. focus is on Basel II enhancements)
120
Securitisation – Panel A
• Rows 11 and 19 irrelevant under APS 120 (current and new)
• Row 15 completed in accordance with APS 120 Attachment C
paragraphs 7-9 (current and new)
• Row 16 completed in accordance with APS 120 Attachment C
paragraphs 10-11 (current and new)
• Row 17 completed in accordance with APS 120 Attachment C
paragraphs 12-13 (current and new)
• Rows 23 and 24 are relevant as APS 120 applies cap to all ADIs under
APS 120 Attachment B paragraph 23 (current) and paragraphs 26-27
(new)
121
Securitisation – Panel B
• Rows 45, 64, 70 and 76 are irrelevant under APS 120 (current and new)
• Rows 33, 52 and 82 not applicable to Australian ADIs
• Rows 32-44 completed in accordance with APS 120 Attachment D
paragraphs 4-10 (current) and paragraphs 4-11 (new)
• Rows 51-63 completed in accordance with APS 120 Attachment D
paragraphs 11-14 (current) and paragraphs 12-15 (new)
• Rows 68-69 completed in accordance with APS 120 Attachment D
paragraphs 15-36 (current) and paragraphs 16-37 (new)
• Row 74 relates to treatment under APS 120 Attachment D paragraph 37
(current) and paragraph 38 (new)
• Rows 80-81 relate to APS 120 Attachment B paragraph 23 (current) and
paragraphs 26-27 (new)
122
Operational risk
Michael Booth
123
OpRisk – background / general
• Gross Income & assets are only partial indicators for OpRisk capital
• Collect additional data to support SIGOR’s review of OpRisk metrics
–
Review the appropriateness / calibration of BIA & TSA
–
Are there additional or alternate measures?
–
Assess influences of BIA & TSA on AMA implementation
• General Info worksheet:
–
Participated in 2008 LDCE ? (Cell C26)
–
OpRisk risk-weighted assets: ASA / AMA (Rows 99,100)
• DefCapCal worksheet – Rows 123,124
124
OpRisk – general information
• OpRisk worksheet required for AMA banks only!
• By year:
2006 to 2009
• Approach: ASA or AMA
• M & A:
Yes / No (default)
• Disposals:
Yes / No (default)
Year
2006
2007
2008
2009
Approach
Mergers/ acquisitions with
relevant effects on the
operational risk regulatory
capital
No
No
No
No
Disposals with relevant
effects on the operational
risk regulatory capital
No
No
No
No
125
OpRisk – exposure indicators
• By reference year (2005 to 2009)
• By Basel business line* where applicable (“best effort” basis)
• Potential Alternatives to Gross Income
– Size / Complexity
– On- /off-balance sheet items
– Income statement
• Gross Income and its components
• Generally IAS / IFRS definitions (Please document any deviations)
• See QIS documentation for more detailed information
126
OpRisk – Operational Risk Losses
• By discovery year or year of financial impact (2005 to 2009)
• By whole-firm & Basel business line
• Number:
– Loss events ≥ €10,000 (AUD $20,000) or ≥ €20,000 (AUD $34,000*)
• Severity:
– Total amount of losses ≥ €20,000 (AUD $34,000)
– Sum of the five largest losses
– Maximum loss
• *Exchange rate: 1 AUD = 0.5882 € (for €20,000 loss threshold)
127
OpRisk – QIS & APRA
• Parts of the current framework can be further enhanced
• APRA is actively involved in SIGOR discussions and working groups
• Information collected will provide additional information for analysis
on the size, scale and nature of the ADI’s and provide comparisons
between jurisdictions
• Important to note that the overall operational risk profile of an entity
depends on the combined influence of many different drivers, such
as: its nature, complexity and size; internal operating environment,
external environment, material changes and culture. The
information being collected does not cover all these aspects
• Further work towards understanding the operational risk profiles is
being undertaken as part of APRA’s internal loss and scenario analysis
data collection exercises
128
OpRisk – Questions?
• Question.
Are we there yet?
• Answer.
ALMOST…
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Wrap-up
Slides will be made available on the APRA website
Questions
130