Document ID: chunk:federal_register_of_legislation:F2022L01562:body:0:p12
Version: federal_register_of_legislation:F2022L01562
Segment Type: other
Provision Reference: 
Character Range: 29492–32405

rewards associated with the investments are borne primarily by third parties;
(c)          the ADI can demonstrate to APRA, if required, that decisions to acquire or sell such capital instruments are made independently of the issuer of the capital instruments and in the interests of the third parties who primarily bear the risks and rewards of the investments in the instruments; and
(d)          the instruments are not held for the purposes of an employee share-based remuneration scheme.
50.         Direct investments in shares of an ADI by an SPV (e.g. a trust) established under a share-based employee remuneration scheme may be included in the ADI's Common Equity Tier 1 Capital (on a Level 1 and Level 2 basis, as appropriate) only if:
(a)          the shares issued to the SPV represent ordinary shares of the ADI;
(b)          the amount included in Common Equity Tier 1 Capital is matched by an equivalent charge to profit or loss of the ADI for expensing the issue or funding the acquisition of ordinary shares, by the vehicle; and
(c)          the ordinary shares issued cannot be converted to payment in another form (e.g. cash).
For the purposes of measuring Regulatory Capital at Level 2, the SPV holding such shares must be excluded from the consolidated group. As a consequence, any associated change in the fair value of the shares held by an SPV must be excluded from Regulatory Capital and risk-weighted assets at Level 2.
51.         If the requirements in paragraphs 49 and 50 of this Prudential Standard are not satisfied, the relevant capital instruments must be treated as holdings of own capital instruments and deducted from Common Equity Tier 1 Capital, Additional Tier 1 Capital and Tier 2 Capital, as appropriate.

Attachment A -       Use of Fair Values
     1. An ADI may measure its financial instruments at fair value for capital adequacy and, where permitted, for other stated prudential purposes referred to in other Prudential Standards, provided:
(a)          the ADI complies with the requirements of Australian Accounting Standards relating to the use of fair values;
(b)          valuations are reliable, including use of reasonable estimates of values;
(c)          the use of fair values and associated valuations are covered by the ADI's risk management systems, including related risk management policies, procedures and controls;
(d)          the ADI notifies APRA promptly whenever there is a material:
(i)            reclassification by the ADI of financial assets and liabilities from amortised cost to fair values or from fair values to amortised cost; or
(ii)         change in
(A)         the systems and controls used for valuation purposes;
(B)        the valuation methodologies; or
(C)        the valuation adjustments employed to produce fair values of financial instruments; and
(e)          the ADI meets all requirements set out below as applicable,