Financial Sector (Collection of Data) (reporting standard) determination No. 71 of 2008 GRS 150.0 (2008) Asset Exposure Concentrations and Risk Charge (Cth)

Financial Sector (Collection of Data) (reporting standard) determination No. 71 of 2008

Reporting Standard GRS 150.0 (2008) Asset Exposure Concentrations and Risk Charge  

Financial Sector (Collection of Data) Act 2001

I, Charles Watts Littrell, a delegate of APRA, under paragraph 13(1)(a) of the Financial Sector (Collection of Data) Act 2001 (the Act) and subsection 33(3) of the Acts Interpretation Act 1901:

·    REVOKE Reporting Standard GRS 150.0 (2007) Asset Concentration and Risk Charge which is in force as at the date of this determination (the old standard); and

·    DETERMINE Reporting Standard GRS 150.0 (2008) Asset Exposure Concentrations and Risk Charge in the form set out in the Schedule (the new standard), which applies to the financial sector entities referred to in paragraph 2 of the new standard.

Under section 15 of the Act, I DECLARE that the new standard shall begin to apply, and the old standard shall cease to apply, on the date of registration of this instrument on the Federal Register of Legislative Instruments.

Dated 16 October 2008

[Signed]

Charles Littrell

Executive General Manager

Policy, Research and Statistics

Interpretation

In this Determination

APRA means the Australian Prudential Regulation Authority.

Federal Register of Legislative Instruments means the register established under section 20 of the Legislative Instruments Act 2003.
Schedule

Reporting Standard GRS 150.0 (2008) Asset Exposure Concentrations and Risk Charge comprises the 21 pages commencing on the next page.

Reporting Standard GRS 150.0 (2008)

Asset Exposure Concentrations and Risk Charge

Objective of this reporting standard

This reporting standard is made under section 13 of the Financial Sector (Collection of Data) Act 2001 (the Collection of Data Act). It requires general insurers (insurers), including foreign general insurers (foreign insurers) operating in Australia through branch operations, to report to APRA, generally on a quarterly and annual basis, any asset concentrations.

This reporting standard outlines the overall requirements for the provision of this information to APRA. It should be read in conjunction with:

·Form GRF 150.0 Asset Exposure Concentrations and Risk Charge (Form GRF 150.0) and the instructions to that form (which are attached and form part of this reporting standard); and

·any prudential standards referenced in the attached instructions.

Purpose

1.Data collected in Form GRF 150.0 is used by APRA for the purpose of prudential supervision including assessing an insurer’s compliance with the capital standards [1].

[1] Reference to capital standards has the same meaning as in Prudential Standards GPS 001 Definitions, where the capital standards refer collectively to prudential standards relating to capital adequacy.

Application and commencement

2.This reporting standard applies to all insurers for reporting periods commencing on or after 1 July 2008. 

Information required

3.An insurer must provide APRA with the information required by Form GRF 150.0 for each reporting period.

Forms and method of submission

4.The information required by this reporting standard must be given to APRA either:

(a)in electronic form using the ‘Direct to APRA’ application, applying one of the electronic submission mechanisms under that application; or

(b)by manually completing Form GRF 150.0 on paper and mailing the completed form to APRA’s head office at Level 26, 400 George Street, Sydney, New South Wales.

Where the information is submitted by means of an agent to whom the insurer has outsourced the function of providing the information on the insurer’s behalf, the agent may only provide the information in accordance with subparagraph 4(b) if the agent has contacted APRA and advised that the agent cannot submit the information in electronic form under subparagraph 4(a).

Note: the Direct to APRA application software and paper forms may be obtained from APRA.

Reporting periods and due dates

5.Subject to paragraph 6, an insurer must provide the information required by this reporting standard:

(a)in respect of each quarter based on the financial year (within the meaning of the Corporations Act 2001) of the insurer; and

(b)in respect of each financial year (within the meaning of the Corporations Act 2001) of the insurer.

Note: The annual information required by paragraph 3 read with subparagraph 5(b), together with certain annual information required by other reporting standards, will form part of the insurer’s yearly statutory accounts within the meaning of section 3 of the Insurance Act 1973 (the Insurance Act). This means that the information must be audited in accordance with paragraph 49J(1)(a) of the Insurance Act. Under subsection 49J(3), the auditor must give the insurer a certificate relating to the yearly statutory accounts, and that certificate must specify the matters provided for in the prudential standards.

6.APRA may, by notice in writing, change the reporting periods, or specified reporting periods, for a particular insurer to require it to provide the information:

(a)more frequently (if, having regard to the particular circumstances of the insurer, APRA considers it necessary or desirable to obtain information more frequently for the purposes of the prudential supervision of the insurer); or

(b)less frequently (if, having regard to the particular circumstances of the insurer and the extent to which it requires prudential supervision, APRA considers it unnecessary to require the insurer to provide the information as frequently as provided by subparagraph 5(a) or (b)).

7.The information required by paragraph 3 of this reporting standard from an insurer must be provided to APRA by the following times:

(a)in the case of the quarterly information required by subparagraph 5(a) – 20 business days after the end of the reporting period to which the information relates; and

(b)in the case of the annual information required by subparagraph 5(b) – 4 months after the end of the reporting period to which the information relates.

Note: Paragraph 49L(1)(a) of the Insurance Act provides that the auditor’s certificate required under subsection 49J(3) of that Act must be lodged with APRA in accordance with the prudential standards. The prudential standards provide that the certificate must be submitted to APRA together with the yearly statutory accounts. Accordingly, the auditor’s certificate relating to the information provided under paragraph 3 read with subparagraph 5(b) must be provided to APRA by the time specified in subparagraph 7(b) of this reporting standard (unless an extension is granted under paragraph 8).

8.APRA may grant an insurer an extension of a due date in writing, in which case the new due date for the provision of the information will be the date on the notice of extension.

Quality control

9.The information provided by an insurer under this reporting standard must be the product of processes and controls that have been reviewed and tested by the appointed auditor of the insurer. This will require the auditor to review and test the systems, processes and controls supporting the reporting of the information to ensure that they produce accurate data and are otherwise reliable.  This review and testing must be done on an annual basis or more frequently if necessary to enable the appointed auditor to form an opinion on the accuracy and reliability of the data. 

10.The information provided by an insurer under this reporting standard must be subject to processes and controls developed by the insurer for the internal review and authorisation of that information. It is the responsibility of the board and senior management of the insurer to ensure that an appropriate set of policies and procedures for the authorisation of data submitted to APRA is in place.

Authorisation

11.If the officer of an insurer provides the information required by this reporting standard:

(a)under subparagraph 4(a), the officer must digitally sign, authorise and encrypt the information (for which purpose APRA’s certificate authority will issue digital certificates, for use with the ‘Direct to APRA’ application, to officers of the insurer who have authority from the insurer to transmit data to APRA); or

(b)under subparagraph 4(b), the completed form must be signed in accordance with paragraph 13.

12.If an insurer provides the information required by this reporting standard through an agent under either subparagraph 4(a) or (b), the agent will not be required to sign or authorise the information.  However, the insurer must:

(a)obtain from the agent a paper copy of the completed form as provided to APRA (whether it was provided under subparagraph 4(a) or (b)); and

(b)cause the paper copy to be signed in accordance with paragraph 13; and

(c)lodge the signed paper copy with APRA by mailing the completed form to APRA’s head office at Level 26, 400 George Street, Sydney, New South Wales, by the relevant due date (unless APRA, in writing, waives the requirement to lodge the signed paper copy with APRA by varying this reporting standard in relation to the insurer).

Note: APRA may, for example, determine to waive the requirement under subparagraph 12(c) where an insurer has undertaken to retain the signed copy of the completed form for an agreed period of time.

13.If information under this reporting standard is provided in paper form, it must be signed on the front page of the relevant completed form by either:

(a)the Principal Executive Officer of the insurer; or

(b)the Chief Financial Officer of the insurer (whatever his or her official title may be).

Minor alterations to forms and instructions

14.APRA may make minor variations to the instructions to a form, to clarify their application to the form without changing any substantive requirement in the form or instructions.

15.If APRA makes such a variation it must notify insurers in writing.

Transition

16.An insurer must report in relation to a reporting period ending prior to 1 July 2008 in accordance with the reporting standard that this reporting standard replaced.

Interpretation

17.In this reporting standard:

appointed auditor means an auditor appointed under paragraph 39(1)(a) of the Insurance Act;

business days means ordinary business days, exclusive of Saturdays, Sundays and public holidays;

capital standards means the prudential standards which relate to capital adequacy as defined in Prudential Standard GPS 001 Definitions;

foreign insurer means a foreign general insurer within the meaning of the Insurance Act;

Note: A reference to a ‘branch’ or ‘branch operation’ is a reference to the Australian operations of a foreign insurer.

Insurance Act means the Insurance Act 1973;

insurer means a general insurer within the meaning of the Insurance Act;

Note: In the forms and instructions, a reference to an ‘authorised insurer’, ‘authorised insurance entity’ or ‘licensed insurer’ is a reference to an insurer, and a reference to an ‘authorised reinsurance entity’ is a reference to an insurer whose business consists only of undertaking liability by way of reinsurance.

Principal Executive Officer means the principal executive officer of the insurer for the time being, by whatever name called, and whether or not he or she is a member of the governing board of the insurer;

reporting period means a period mentioned in subparagraph 5(a) or (b) or, if applicable, paragraph 6.

18.A reference to a prudential standard means the prudential standard, made under section 32 of the Insurance Act, mentioned in the reference, as amended from time to time. If the prudential standard or guidance note has been revoked and replaced, the reference shall be taken to be to the prudential standard that has replaced it.

Reporting Form GRF 150.0

Asset Exposure Concentrations and Risk Charge

Instruction Guide

Introduction

This form collects information on large exposures and concentrations of the reporting insurer and calculates the investment concentration risk charge applicable to these asset exposures and concentrations. The calculation is done in accordance with the Prescribed Method outlined in GPS 114 Capital Adequacy: Investment Risk Capital Charge (GPS 114).

Audit requirements

The form relating to authorised insurance entities and reinsurance entities is required to be subject to audit review and testing.

The scope and nature of audit testing required is outlined in the applicable Auditing and Assurance Guidance Statement issued by the Auditing and Assurance Standards Board.

Information provided in the form in respect of a financial year of an insurer forms part of the insurer’s ‘yearly statutory accounts’ within the meaning of section 3 of the Insurance Act 1973.  This means that:

·the completed form for the financial year must be audited by the Appointed Auditor of the insurer (see paragraph 49J(1)(a) of the Act);

·the insurer must make such arrangements as to enable the auditor to do this (subsection 49J(2)); 

·the auditor must give the insurer a certificate relating to the completed form (and other completed forms that are part of the insurer’s yearly statutory accounts), which must contain statements of the auditor’s opinion on the matters required by the prudential standards to be dealt with in the certificate (subsection 49J(3));

·the certificate must be lodged with APRA as provided for in the prudential standards (paragraph 49L(1)(a)), namely by the due date for lodging the form in respect of the financial year for the insurer.

Reporting entity

This form is to be completed by:

1.Branch insurers of a foreign parent insurer (reference to licensed insurer in the form means total operations of the branch, excluding the parent operations). For Branch insurers ‘Adjusted net assets in Australia’ has been used in the calculation of the exposure threshold. ‘Adjusted net assets in Australia’ refer to total assets less assets that are excluded as ‘assets in Australia’ for the purpose of section 28 of the Insurance Act 1973.

2.Authorised insurance entities, including mutual entities (reference to licensed insurer in the form means total operations of the licensed entity). For licensed entities, ‘Capital Base’ has been used in the calculation of the exposure threshold; and

3.Authorised reinsurance entities (reference to licensed insurer in the form means total operations of the licensed entity). For licensed entities, ‘Capital Base’ has been used in the calculation of the exposure threshold.

Unit of measurement

Amounts denominated in foreign currency are to be converted to AUD in accordance with AASB 121 ‘The Effects of Changes in Foreign Exchange Rates’.

The general requirements of AASB 121 ‘The Effects of Changes in Foreign Exchange Rates’ for translation are:

1.Foreign currency monetary items[2] outstanding at the reporting date must be translated at the spot rate[3] at the reporting date.

[2]           Monetary items are defined to mean units of currency held and assets and liabilities to be received or paid in a fixed or determinable number of units of currency.

[3]           Spot rate means the exchange rate for immediate delivery.

2.Foreign currency non-monetary items[4] that are measured at historical cost in a foreign currency must be translated using the exchange rate at the date of the transaction.

[4]           Examples of non-monetary items include amounts prepaid for goods and services (e.g. prepaid rent); goodwill; intangible assets; physical assets; and provisions that are to be settled by the delivery of a non-monetary asset.

3.Foreign currency non-monetary items that are measured at fair value will be translated at the exchange rate at the date when fair value was determined.

Transactions arising under foreign currency derivative contracts at the reporting date must be prepared in accordance with AASB 139 ‘Financial Instruments: Recognition and Measurement’.  However, those foreign currency derivatives that are not within the scope of AASB 139 ‘Financial Instruments: Recognition and Measurement’ (e.g. some foreign currency derivatives that are embedded in other contracts) remain within the scope of AASB 121 ‘The Effects of Changes in Foreign Exchange Rates’.

For APRA purposes equity items must be translated using the foreign currency exchange rate at the date of investment or acquisition. Post acquisition changes in equity are required to be translated on the date of the movement.

As foreign currency derivatives are measured at fair value, the currency derivative contracts are translated at the spot rate at the reporting date.

Exchange differences should be recognised in profit and loss in the period which they arise. For foreign currency derivatives, the exchange differences would be recognised immediately in profit and loss if the hedging instrument is a fair value hedge. For derivatives used in a cash flow hedge, the exchange differences should be recognised directly in equity.

The ineffective portion of the exchange differences in all hedges would be recognised in profit and loss.

4.Translation of financial reports of foreign operations.

A foreign operation is defined in AASB 121 ‘The Effects of Changes in Foreign Exchange Rates’ as meaning an entity that is a subsidiary, associate, joint venture or branch of a reporting entity, the activities of which are based or conducted in a country or currency other than those of the reporting entity.

·Exchange differences relating to foreign currency monetary items that form part of the net investment of an entity in a foreign operation, must be recognised as a separate component of equity.

·Translation of financial reports should otherwise follow the requirements in AASB 121 ‘The Effects of Changes in Foreign Exchange Rates’.

Reporting period

Insurers are required to report the information in the reporting form on a quarterly and annual basis.

·The quarterly information is to be completed in respect of each quarter based on the financial year of the insurer, not the calendar year.

·The annual information is to be completed in respect of the financial year of the insurer.

·The financial information requested in this form is to be reported as at the last day of the reporting period on a financial year to date basis of the insurer.

Reporting lag

This form must be lodged for each of the reporting units within the number of business days after the end of the quarter as set out in Reporting Standard GRS 150.0 Asset Exposure Concentrations and Risk Charge.

Specific instructions

This form is to be completed for each exposure that is greater than:

·10% of Capital for authorised entities; or

·10% of Adjusted net assets in Australia for Australian branch operations.

Report individual asset exposures to a counterparty or a group of related counterparties (i.e. counterparties related to each other whether or not they are related to the insurer) where the aggregate exposure of the insurer to that group of related counterparties exceeds the above applicable 10% threshold, in the appropriate counterparty/asset rating band tables (i.e. “Grade 1 counterparty/asset”, “Grade 2 counterparty/asset”, “Grade 3 counterparty/ asset” or “Grade 4 and Grade 5 counterparty/asset”).

Refer to point 6 below for more information on related counterparties (i.e. counterparties related to each other) for the purposes for this form.

Refer to point 7 below for more information on counterparties related to the insurer for the purposes of this form.

Report the group to which the counterparty belongs in the second column on the form. 

Within each of these rating grades (i.e. ‘Grade 1 counterparty/asset (Rating AAA)’), report each individual asset exposure and select the applicable investment capital factor. Refer to GPS 114 for further clarification on counterparty/asset grades and investment capital factors applying to assets.

Calculation of Concentration risk charge

The investment concentration risk capital charge is based on the credit rating of the counterparty[5] and only applies to exposures of a counterparty or a group of related counterparties that exceed the maximum concentration thresholds as a percentage of capital (licensed entities)/adjusted net assets in Australia (for branches) as specified in GPS 114. These thresholds are:

[5]           In case of collateral, the obligor (as referred in GPS 114) represents the counterparty; in case of guarantee, the guarantor (as referred in GPS 114) represents the counterparty; and in the case of letter of credit, the issuer (as referred in GPS 114) represents the counterparty.

Counterparty rating (unsecured obligations)	Threshold as a Percentage of Capital Base/Adjusted net assets in Australia
Grade 1, 2 or 3 Grade 4 Grade 5	No limit 50% 25%

An insurer must apply the relevant Investment Capital Factor to an asset or assets up to the value of the threshold, and apply a 100% Investment Capital Factor for the value in excess of this level to calculate the Investment Concentration Charge.  In the case of exposures to a group of related counterparties, exposures are aggregated both against counterparties of the same grade and upwards through the rating grades, with the threshold for each grade applying to aggregate exposures summed for that grade and all lower quality grades, excluding any exposures which are already subject to a 100% capital factor.

This method is described as:

Exposures to a group of related counterparties at the Grade 5 level are aggregated to determine the amount in excess of the Grade 5 threshold to which the 100% Investment Capital Factor is applied.  Those exposures to a group of related counterparties at the Grade 5 level (up to the Grade 5 threshold) are then aggregated with all the exposures to that group of related counterparties at the Grade 4 level to determine the amount in excess of the Grade 4 threshold to which the 100% Investment Capital Factor is applied.

Other issues that must be noted for the purposes of completing this form are set out below:

1.For licensed insurance entities, ‘Capital Base’ of the Licensed entity must be determined in accordance with GPS 112 Capital Adequacy: Measurement of Capital (GPS 112).

2.For branch operations, ‘Adjusted net assets in Australia’ of the branch operation is calculated by applying the requirements of GPS 120 Assets in Australia.

3.Report all exposures in the appropriate counterparty/asset rating band columns and select the appropriate investment capital factor.  Report the fair value of the asset, net of provision for doubtful debts, as per GRF 300.0 Statement of Financial Position and GRF 301.0 Reinsurance Assets and Risk Charge, except where the insurer has in place netting agreements that are in the form of a legally recognised right to net or set off in accordance with AASB 132 ‘Financial Instruments: Presentation’.

4.Where the counterparty rating is revised and/or investment capital factor of an asset is reduced due to credit support received (e.g. guarantee, letter of credit or eligible collateral as defined in GPS 114), the exposure must be reported taking into account the credit support received (i.e. the appropriate counterparty/asset rating should be reported).

5.Exposures include claims and commitments of the licensed insurance company recorded both on and off the balance sheet of the reporting Insurer, that are of the following nature:

(a)Credit exposures (i.e. exposure to a counterparty or group of related counterparties); and/or

(b)Asset exposures that are not in the nature of a credit exposure (e.g. equity investments).

On-Balance Sheet Exposures

Report the fair value of exposures, net of provision for doubtful debts, recognised on-balance sheet (i.e. exposure recorded in GRF 300.0 Statement of Financial Position and GRF 301.0 Reinsurance Assets and Risk Charge), except where point 3 above is satisfied in regards to netting. Fair value has the same meaning as defined in the Australian accounting standards, that is, the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s-length transaction.

Off-Balance Sheet Exposures

Note: Refer to the GRF 130 series

For off-balance sheet transactions (i.e. exposures not recorded in GRF 300.0 Statement of Financial Position and GRF 301.0 Reinsurance Assets and Risk Charge) and exposures, include direct credit substitutes, trade and performance related contingent items, guarantees, collateral and other commitments, that are of a credit nature, whether revocable or not.

The following exposures must not be taken into account in determining the Investment Concentration Charge:

(a)     Exposures to which an Investment Capital Factor of 0% is applied; and

(b)     Assets to which an Investment Capital Factor of 100% is applied.

6.Group of related counterparties (counterparties related to each other whether or not they are related to the insurer): Two or more counterparties will form a group of related counterparties, for the calculation of concentration risk charge, if they are linked by:

(a)     Cross guarantees;

(b)     common ownership or management;

(c)     the ability of a counterparty to exercise control (defined in accordance with Australian Accounting Standards issued by AASB) over the other(s) whether direct or indirect;

(d)     financial interdependency such that the financial soundness of any of them may affect the financial soundness of the other(s); or

(e)     other connections or relationships which, according to an insurer’s assessment, identify the counterparties as constituting a single risk

7.Counterparties related to the insurer: Exposures of the reporting insurer to related parties (i.e. parent entity, subsidiaries, associates and joint ventures) must be included in the analysis.

'Related parties' is to be interpreted consistently with its definition and meaning as contained in AASB 124 ‘Related Party Disclosures’.

In accordance with AASB 124, related party means a party that directly or indirectly through one or more intermediaries:

(a)controls, is controlled by or is under common control with, the entity (this includes parents, subsidiaries and fellow subsidiaries);

(b)has significant influence over the entity or has joint control over the entity; or

(c)     is an associate (as defined in AASB 128 ‘Investments in Associates’) of the entity; or

(d)is a joint venture in which the entity is a venturer (see AASB 131 ‘Interests in Joint Ventures’); or

(e)is a member of the key management personnel of the entity or its parent; or

(f)is a close member of the family of any individual referred to in (a), (b) or (e); or

(g)     is an entity that its controlled, jointly controlled or significantly influenced by, or for which significant voting power in such entity resides with, directly or indirectly, any individual referred to in (e) or in (f); or

(h)     is a post-employment benefit plan for the benefit of the employees of the entity, or of any entity that is a related party of the entity.

8.Exposures to the foreign parent and the related entities of the parent (where applicable) are to also be considered in the analysis. This will include the following:

Direct Exposures

This incorporates direct exposures of the reporting insurer to the foreign parent and to any branches, subsidiaries and other related parties of the foreign parent.

Indirect Exposures

This incorporates indirect exposures of the Insurer covered by risk transfer arrangements to the reporting Insurer’s foreign parent or to the subsidiaries of the foreign parent.

9.      For the purposes of the Investment Concentration Charge, investments in equity or subordinated debt must be regarded as having the same rating as unsecured debt of the issuer.

The following column headings on the form are to be interpreted as set out below:

Name of counterparty

Report the name of the counterparty in this column.

Counterparty Group Name

Report the name of the group to which the counterparty belongs in this column.

For the purposes of the form, individual counterparties with the same counterparty group name will be assumed to be related to each other, ie the aggregation of exposures for calculating the concentration risk charge will be determined by the counterparty group name.

Type of Exposure (i.e. type of investment/asset)

Detail the type of asset (e.g. holdings of listed equity instruments, debt instruments, loan, reinsurance recoveries, guarantee and letters of credit).

Grade

Note: This column is only applicable for the Grade 4 and 5 counterparty/asset table.

Select the appropriate counterparty grade (either 4 or 5) for the type of exposure to the counterparty.

Capital factor

Select the investment capital factor used to determine the investment risk charge on the type of exposure reported.  The investment capital factors are specified in GPS 114 (Attachment A).

Is Performance of Asset Impaired [Y/N]

Select “Y” or “N” in this column for each exposure listed. For the purposes of this form, impairment means there exists reasonable doubt that amounts of principal (or fair value) and any associated amounts of accrued income (e.g. interest, dividends, distributions associated with the investment/asset) will be able to be collected by the Insurer.

Related party of Reporting Insurer

If the exposure of the insurer is to an entity related to the Insurer, select the appropriate related party from the following list:

·Parent

·Controlled entity

·Associate/Joint venture

·Other.

On-Balance Sheet Exposures

Refers to exposures that are recorded in GRF 300.0 Statement of Financial Position. Report the fair value of exposures, net of provision for doubtful debts (as per GRF 300.0 Statement of Financial Position), except where a legal right of set off exists in accordance with AASB 132 ‘Financial Instruments: Presentation’.

Off Balance Sheet Exposure

Refers to assets that are not recorded in GRF 300.0 Statement of Financial Position. (Refer to the GRF 130 series).

For off-balance sheet transactions and exposures, include the gross value of direct credit substitutes, trade and performance related contingent items, guarantees, collateral and other commitments, that are of a credit nature, whether revocable or not.

Total Exposure

This is automatically calculated by the form.  This item refers to the total of the “On Balance Sheet” and “Off Balance Sheet” amounts listed for each individual counterparty/exposure.

Component of Investment representing goodwill & Other Intangible Assets

Refers to that component of the value of an investment in a controlled entity (as defined in the Australian Accounting Standards) or associated entity (as defined in the Australian Accounting Standards), that constitutes goodwill and/or other intangible assets. Though this value will be included in the value disclosed in the column “On Balance Sheet Exposure”, it still needs to be separately disclosed in this column. 

Grade 4 Net tangible exposure

Note: This column is only applicable for the Grade 4 and 5 counterparty/asset table.

This is automatically calculated by the form.  This item refers to the difference between the ‘Total Exposure’ and ‘Intangible Component’ for each Grade 4 exposure.

Grade 5 Net tangible exposure

Note:  This column is only applicable for the Grade 4 and 5 counterparty/asset table.

This is automatically calculated by the form.  This item refers to the difference between the ‘Total Exposure’ and ‘Intangible Component’ for each Grade 5 exposure.

Gross concentration risk charge

Note:  This column is only applicable for the Grade 4 and 5 counterparty/asset table.

This is automatically calculated by the form. In accordance with GPS 114. See note on ‘Calculation of concentration risk charge’ earlier in these instructions for details on the thresholds applied.

Investment Risk Charge on Assets subject to Concentration Risk Charge

Note: This column is only applicable for the Grade 4 and 5 counterparty/asset table.

The form automatically calculates the appropriate Investment Risk Charge attributable to the exposure in excess of the concentration exposure threshold.

Net Concentration Risk Charge

The form automatically calculates the Net Concentration Risk Charge. It is calculated by deducting the Investment Risk Charge on assets subject to the Concentration Risk Charge from the “Gross Concentration Risk charge”. This amount is used for the calculation of the Minimum Capital Requirement.