Read the link. The $27bn asset and $25bn liability, which are in the BS, and any movement on which is taken to the P&L, are calculated according to the requirements of that link. The AAS don't come into it, except so far as they might acknowledge the requirements of APRA.
I don't know whether they should be higher or lower. It would be a huge task even for the auditors to determine what a fair value would be - but they don't have to because APRA, in accordance with Basel I, have legislated the job for them. This is basically the same as having a formula for bad debts regardless of market conditions. How would you feel if the banks impairment of assets figure was calculated according to a Govt. formula and not subject to the opinion of the auditors? Only with the derivatives, the numbers are ten times the size.
Perhaps you are too young to remember NAB losing a year's profits because of a stuff up with interest rate derivatives on a $17bn loan portfolio? $4.2bn, or 25% of the value of the loans. Or the Orange County collapse in 1994.
My concern is that the derivative numbers have no solid base for their calculation, and are far too subject to market volatility which can be much greater for interest rates and FOREX than house values.
