Historical rate rollovers - frequently asked questions
Last updated: 12 March 2021
1: What are APRA’s expectations in relation to historical rate rollovers (HRRs) on non-foreign exchange contracts in light of paragraph 17 of APS 180?
HRRs involve the restructuring of an existing derivative transaction at off-market prices. This includes an extension of the settlement date rather than requiring the existing derivative transaction to be cancelled and a new transaction entered into at current spot or forward rates. It may also involve a change in contract notional amount or reference rates conducted at off-market prices. Under APS 180 paragraph 17, HRRs are permitted only on foreign exchange (FX) contracts. HRRs are not permitted on non-FX transactions.
APRA is currently considering this position, including potentially some limited flexibility for ADIs in certain circumstances to transact HRRs on non-FX contracts where we are comfortable with the oversight, limits, risk assessment and controls. This could include, for example, cases where the underlying transaction has been delayed and there is a clear expectation of delivery in the short term. If an ADI is transacting HRRs that are not in compliance with APS 180 Paragraph 17, the ADI must advise their supervisory team as soon as possible and provide details in relation to the non-compliant transactions. APRA will assess the transactions and consider an adjustment to APS 180 for individual ADIs on a case by case basis.
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