460 NEW ZEALAND GAZETTE, No. 21 23 FEBRUARY 2007

(2) The value of a Financial Instrument is:

(a) in the case of an unrecognised Financial Instrument and a recognised Financial Instrument which is a market related
contract, the face or contract amount of the Financial Instrument expressed in New Zealand dollars using the
relevant spot exchange rate; and

(b) in the case of other Financial Instruments, the carrying amount of the Financial Instrument expressed in New
Zealand dollars using the relevant spot exchange rate.

(3) The change in the value of a Financial Instrument is derived by multiplying the value, or proportion of the value, of the
Financial Instrument allocated to the applicable time band specified in Table 1, in accordance with clause 3(4), by the risk
weight specified for that time band in Table 1.

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:

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: