NEW ZEALAND GAZETTE, No. 35

11 FEBRUARY 2005

Table 1: Time Bands, Risk Weights, and Assumed Interest Rate Changes

(4) Subject to clauses 3 (5) and 3 (6) of this Schedule, the value of each Financial Instrument, or a proportion of it, shall be allocated to the time band specified in Table 1 in a manner which the Registered Bank believes, on reasonable grounds, reflects the date on which the interest rate applicable to the Financial Instrument, or proportion of the Financial Instrument, will be altered, or the date at which the principal, or a proportion of the principal, will be paid, notwithstanding the Interest Rate Repricing Date of the Financial Instrument.

(5) Notwithstanding clause 3 (4) of this Schedule:

(a) a Registered Bank may exclude from the application of clause 3 (4) of this Schedule the value, or the appropriate proportion of the value, of those Financial Instruments which meet the netting criteria contained in clause 4; and

(b) the aggregate value, or the appropriate proportion of the aggregate value, of all Rate Insensitive Retail Assets and of all Rate Insensitive Retail Liabilities shall be allocated to the time bands specified in Table 2 in accordance with the percentages set out in Table 2.

Table 2: Allocation of the value of Rate Insensitive Retail Products across time bands

(6) A Registered Bank may exclude the value of options and, instead, use its own methodology to determine the Interest Rate Exposure in any currency arising from options and add the amount so derived to the total Interest Rate Exposure in that currency.

4. Netting Criteria—A Registered Bank may exclude the value of Financial Instruments in respect of which it has matched positions which meet any one of the following criteria:

(a) the matched position comprises the same Financial Instruments with the same issuer, coupon, currency and maturity; or

(b)

(i) with respect to matched positions comprising futures, the underlying Financial Instruments to which the futures relate:

(A) are for the same product;

(B) have the same value or notional value;

(C) are denominated in the same currency; and

(D) mature within seven days of each other; or

(ii) with respect to matched positions comprising swaps (including separate legs of different swaps) or FRAs, the underlying Financial Instruments to which the swaps or FRAs relate:

(A) are for the same product;

(B) have the same value or notional value;

(C) are denominated in the same currency;

(D) have reference rates (for floating rate positions) which are identical;

(E) have coupon rates which are identical or which do not differ by more than 15 basis points; and

(F) have the time to run before the next Interest Rate Repricing Date within the following limits:

or

(iii) with respect to matched positions comprising forwards, the underlying Financial Instruments to which the forwards relate:

(A) are for the same product;

(B) have the same value or notional value;

(C) are denominated in the same currency; and

(D) have the time to run before the next Interest Rate Repricing Date within the following limits:

5. The Amount of Vertical Disallowance in a Single Currency—(1) The amount of vertical disallowance in a single currency is the sum of the vertical disallowances calculated in accordance with clause 5 (2) for each of the time bands specified in Table 1 of this Schedule.

(2) The amount of vertical disallowance in a time band shall be calculated as follows: