23 FEBRUARY 2007 NEW ZEALAND GAZETTE, No. 21

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(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:

Earliest Repricing Date     Limits
Less than one month hence:  same day
Between one month and one year hence:   within seven days
More than one year hence:       within thirty days;

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:

Earliest Repricing Date     Limits
Less than one month hence:  same day
Between one month and one year hence:   within seven days
More than one year hence:       within thirty days.

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:

   (a) derive the risk weighted matched position in the time band (which is either the lesser of the sum of the absolute
   values of the Financial Assets and the sum of the absolute values of the Financial Liabilities in that time band, or, if
   those sums are equal, that sum, multiplied by the risk weight for that time band);
   (b) derive the risk weighted value of the Rate Insensitive Retail Products in that time band (which is the sum of the
   absolute values of the Rate Insensitive Retail Assets and Rate Insensitive Retail Liabilities in that time band
   multiplied by the risk weight for that time band);
   (c) if the risk weighted matched position is less than or equal to the risk weighted value of the Rate Insensitive Retail
   Products in a time band, then the vertical disallowance amount for that time band is the risk weighted matched
   position multiplied by 20%;
   (d) if the risk weighted matched position is greater than the risk weighted value of the Rate Insensitive Retail Products
   in a time band, then the vertical disallowance amount for that time band is:

    (i) the risk weighted value of the Rate Insensitive Retail Products multiplied by 20%; plus
    (ii) the difference between the risk weighted matched position and the risk weighted value of the Rate
        Insensitive Retail Products, multiplied by 5%.

   (3) The vertical disallowance in a currency shall have the same sign (positive or negative) as the directional risk calculated
   for that currency.

6. The Amount of Horizontal Disallowance in a Single Currency—(1) The amount of horizontal disallowance in a single
   currency shall be calculated in accordance with clauses 6(2) to 6(6).

   (2) Allocate the time bands specified in Table 1 of this Schedule to the three time zones specified in Table 3:

   Table 3: Time zones

   Time Bands Time Zones
   up to 1 month
   1-6 months Zone 1
   6-12 months
   1-2 years Zone 2
   2-4 years
   4-6 years
   6-10 years Zone 3
   over 10 years

   (3) Calculate the amount of the intra-zone disallowance in each time zone as follows:

   (a) derive the risk weighted net position in each time band (which is the amount of the risk weighted Financial Assets
   less the amount of the risk weighted Financial Liabilities in that time band). If the risk weighted net position in a
   time band is positive, this is a risk weighted long position and if it is negative, this is a risk weighted short position;