44.7 Material Currency

In the standardized approach, the loss in the economic value of equity is calculated for each cur­rency with material exposures. Material exposure is defined as accounting for more than 5% of either banking book assets or liabilities."

ALM provides the following to meet this requirement:

1. Identify Banking Book assets and liabilities: For this, the Book Type Indicator attribute is provided in all instrument tables (FSI_D) and FCT_ALM_ACCOUNT_SUMMARY to identify the banking book asset and liability. This attribute has the following three values and will be populated by T2T when data moves from stage to processing:
   • ‘B’ for banking book
   • ‘T’ for trading book
   • ‘O’ for others

   This attribute can be used in conditional assumption and data filter wherever applicable in ALM.

   The attribute is also available in aggregate tables used by the stratification engine.

2. Aggregate Banking Book assets and liabilities for each legal entity.
3. Aggregate Banking Book assets and liabilities for each legal entity and currency.
4. Calculate the ratio of numbers obtained in steps 2 and 3. For more details, see the below flow­chart. If the ratio is more than 5%, then that currency is marked as ‘currency with material expo­sure’ for that legal entity.

Perform this calculation for each As of Date.

Flowchart

Products with following account types are considered as asset:

• Earning Asset (100)
• Other Asset (200)
• Off-balance Sheet (800) and leg type is ‘receivable’ (2)
• Off-balance Sheet Receivable (110)

Products with the following account types are considered as liability:

• Interest bearing liabilities (300)
• Other Liabilities (400)
• Off-balance Sheet (800) and leg type is ‘payable’ (1)
• Off-balance Sheet Payable (310)