Document ID: chunk:federal_register_of_legislation:F2023L00638:body:0:p3
Version: federal_register_of_legislation:F2023L00638
Segment Type: other
Provision Reference: 
Character Range: 5950–8899

accounts are deposited in an account held with an ADI until settlement to payees occurs; and

           (ii)         the PPF provider has no operational control of the account; and

           (iii)       no creditors aside from the beneficiaries or payees of the stored value can have legal recourse to the assets held in this account in the event the PPF provider becomes insolvent or is wound-up.

Responsibility for capital adequacy

    12.         The Board of Directors (Board) of a PPF provider must ensure that the PPF provider maintains an appropriate level of capital commensurate with the level and extent of risks to which the PPF provider is exposed from its activities. To this end, the PPF provider must:

       (a)          have adequate systems and procedures in place to identify, measure, monitor and manage the risks arising from its activities to ensure that capital is held at a level consistent with the PPF provider's risk profile; and

       (b)          maintain and implement a capital management plan, consistent with the overall business plan, for managing its capital levels on an ongoing basis.  The plan must set out:

           (i)            the PPF provider's strategy for maintaining capital resources over time, for example, by outlining its capital needs for supporting the degree of risks involved in the PPF provider's business, how the required level of capital is to be met, as well as the means available for sourcing additional capital where required; and

          (ii)         actions and procedures for monitoring the PPF provider's compliance with minimum capital adequacy requirements, including the setting of trigger ratios to alert management of, and avert, potential breaches to the minimum capital required by APRA.

Minimum capital adequacy requirements

    13.         A PPF provider must maintain Common Equity Tier 1 Capital above its prudential capital requirement (PCR) at all times. The minimum PCR for a PPF provider is 4 per cent of total outstanding stored value liabilities. APRA may change a PPF provider's PCR at any time, including on account of a supervisory review. APRA may express a PCR as a minimum dollar amount. A PPF provider must not publicly disclose its PCR.

    14.         Examples of Common Equity Tier 1 Capital include paid-up ordinary shares and retained earnings. Prudential Standard APS 111 Capital Adequacy: Measurement of Capital details the criteria financial instruments must meet to be classified as Common Equity Tier 1 Capital.

    15.         A PPF provider must continuously monitor its stored value liabilities. If a PPF provider is unable to do so, it must determine if paragraph 14 applies by using the highest value of stored value liabilities held over the preceding six month period, measured in a manner approved by APRA.

Liquidity and asset requirements

    16.         A PPF provider must hold at all times high quality