Document ID: chunk:federal_register_of_legislation:F2022L01562:body:0:p11
Version: federal_register_of_legislation:F2022L01562
Segment Type: other
Provision Reference: 
Character Range: 26910–29755

going concern (Additional Tier 1 Capital only) and gone concern basis across all of the operations of the ADI, or the consolidated subsidiary that issued the instrument; and
(c)          meets all of the requirements of this Prudential Standard for inclusion in Additional Tier 1 Capital or Tier 2 Capital.

Intra-group capital transactions
46.         The matters APRA may consider in assessing whether an item included by an ADI as a component of capital resulting from intra-group transactions is not a genuine contribution to financial strength include, but are not limited to, whether the item:
(a)          is clearly supplied from debt raised by other group members;
(b)          results from intra-group transactions with no economic substance;
(c)          is contributed by a member of the group using funding sourced, directly or indirectly, from the ADI itself; and
(d)          is contributed by a group member and the funding of which contains cross-default clauses that would be triggered as a result of the ADI failing to meet any servicing obligations.
47.         In assessing the overall strength of Level 1 and Level 2 capital adequacy, APRA will have regard to the level of capital adequacy of individual group members of a group to which the ADI belongs, including any limitations in the amount of capital that may be readily extracted from individual group members to provide support, if required, to recapitalise the ADI or other group members.
48.         In measuring Regulatory Capital at Level 2, an ADI must exclude any capital instrument issued by a member of the Level 2 group where the obligations under that instrument are secured, guaranteed, or subject to any other arrangement provided by a member of the group that legally or economically enhances the seniority of claims of investors.

Holding of capital instruments in group members by other group members
49.         Capital instruments of an ADI, a member of a group headed by an ADI, or a NOHC at Level 2 that are held as direct investments by a vehicle, subject to consolidation within the ADI's financial statements in accordance with Australian Accounting Standards, may be included in Common Equity Tier 1 Capital, Additional Tier 1 Capital and Tier 2 Capital (on both a Level 1 and Level 2 basis, as appropriate) only if:
(a)          the ADI (or relevant vehicle) did not fund the acquisition of the capital instruments (i.e. acquisition of capital instruments is funded by third parties such as life insurance policyholders or other third-party investors);
(b)          the risk and 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