||Other Commitments (timing is known)
This is the value, as at the relevant date, of all undrawn (off-balance sheet) lending commitments, where timing of the interest rate repricing is known. This represents the maximum unused portion of the commitment that could be drawn during the remaining period to maturity. Any drawn portion of a commitment forms part of an entity's on-balance sheet exposure and is not to be reported at this item.For the purposes of this item, commitments where no interest rate has been locked in should not be reported.Commitments are generally considered to have arisen once the reporting party makes a firm offer to a client (i.e. customer acceptance is not required). Therefore, a commitment will arise once a letter of offer is provided to the client by the reporting party.
In the interests of having a consistent, simple approach across the industry, this disregards the customer's option to not draw down the approved loan. While this simplified approach is used for these forms, an ADI to which APS 117 applies would not be expected to use this approach in its repricing assumptions under APS 117. Other approaches, such as delta-weighting, may be more appropriate and in any case, the optionality risk must be evaluated under APS 117.
The repricing analysis should be completed on the basis of the expected repricing profile of assets and liabilities, rather than the contractual repricing (i.e.. contractual loan repayment rates) or original maturity. The expected repricing profile of assets and liabilities should take into account expected loan prepayment/amortisation rates and deposit portfolio run-off, rather than contractual repricing where these are expected to be materially different. Where the terms and conditions of a banking book item provide for the full break cost of early withdrawals or repayments ('economic cost') to be charged to the customer, and it is the ADI's standard practice to do so, the ADI may use the contractual rather than expected repricing profile for that item provided this practice is applied consistently over time. This is intended to allow entities to produce a more accurate representation of the interest rate risk of the balance sheet, and it results in practices such as the spreading of core deposits over a longer, expected repricing profile and the shortening of asset profiles to account for loan breaks.