Maturity Method: Time-Bands and Risk Weights

	Coupon 3% or more	Coupon < 3%	Risk weight
Zone 1	1 month or less	1 month or less	0.00%
	1 to 3 months	1 to 3 months	0.20%
	3 to 6 months	3 to 6 months	0.40%
	6 to 12 months	6 to 12 months	0.70%
Zone 2	1 to 2 years	1 to 1.9 years	1.25%
	2 to 3 years	1.9 to 2.8 years	1.75%
	3 to 4 years	2.8 to 3.6 years	2.25%
Zone 3	4 to 5 years	3.6 to 4.3 years	2.75%
	5 to 7 years	4.3 to 5.7 years	3.25%
	7 to 10 years	5.7 to 7.3 years	3.75%
	10 to 15 years	7.3 to 9.3 years	4.50%
	15 to 20 years	9.3 to 10.6 years	5.25%
	> 20 years	10.6 to 12 years	6.00%
		12 to 20 years	8.00%
		> 20 years	12.50%

(b) The market values of the individual long and short net positions in each maturity band are multiplied by the respective risk weighting factors given in Subparagraph CA-9.4.2(a);

(c) Matching of positions within each maturity band (i.e. vertical matching) is done as follows:

(i) Where a maturity band has both weighted long and short positions, the extent to which the one offsets the other is called the matched weighted position. The remainder (i.e. the excess of the weighted long positions over the weighted short positions, or vice versa, within a band) is called the unmatched weighted position for that band;

(d) Matching of positions, across maturity bands, within each zone (i.e. horizontal matching — level 1), is done as follows:

(i) Where a zone has both unmatched weighted long and short positions for various bands, the extent to which the one offsets the other is called the matched weighted position for that zone. The remainder (i.e. the excess of the weighted long positions over the weighted short positions, or vice versa, within a zone) is called the unmatched weighted position for that zone;

(e) Matching of positions, across zones (i.e. horizontal matching — level 2), is done as follows:

(i) The unmatched weighted long or short position in zone 1 may be offset against the unmatched weighted short or long position in zone 2. The extent to which the unmatched weighted positions in zones 1 and 2 are offsetting is described as the matched weighted position between zones 1 and 2;

(ii) After step (i) above, any residual unmatched weighted long or short position in zone 2 may be matched by offsetting the unmatched weighted short or long position in zone 3. The extent to which the unmatched positions in zones 2 and 3 are offsetting is described as the matched weighted position between zones 2 and 3;

The calculations in steps (i) and (ii) above may be carried out in reverse order (i.e. zones 2 and 3, followed by zones 1 and 2).

(iii) After steps (i) and (ii) above, any residual unmatched weighted long or short position in zone 1 may be matched by offsetting the unmatched weighted short or long position in zone 3. The extent to which the unmatched positions in zones 1 and 3 are offsetting is described as the matched weighted position between zones 1 and 3;

(f) Any residual unmatched weighted positions, following the matching within and between maturity bands and zones as described above, will be summed; and

(g) The general interest rate risk capital requirement is the sum of:

(i) Matched weighted positions in all maturity bands x 10%;

(ii) Matched weighted positions in zone 1 x 40%;

(iii) Matched weighted positions in zone 2 x 30%;

(iv) Matched weighted positions in zone 3 x 30%;

(v) Matched weighted positions between zones 1 & 2 x 40%;

(vi) Matched weighted positions between zones 2 & 3 x 40%;

(vii) Matched weighted positions between zones 1 & 3 x 100%; and

(viii) Residual unmatched weighted positions x 100%.

Item (i) is referred to as the vertical disallowance, items (ii) through (iv) as the first set of horizontal disallowances, and items (v) through (vii) as the second set of horizontal disallowances.

January 2015

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Maturity Method: Time-Bands and Risk Weights