Document ID: chunk:federal_register_of_legislation:F2022L01562:body:0:p53
Version: federal_register_of_legislation:F2022L01562
Segment Type: other
Provision Reference: 
Character Range: 137555–140342

requirements upon the overseas incorporated subsidiary must not be a non-viability event for instruments issued by the parent ADI under paragraph 1 of this Attachment.
7.             To qualify as eligible Additional Tier 1 Capital or Tier 2 Capital, an instrument issued by a locally-incorporated ADI that is a subsidiary of a foreign bank must satisfy the requirements in this Attachment. A non-viability event of the ADI, however, need not trigger any loss absorption requirement upon the foreign bank parent.
8.             A locally-incorporated ADI that is a subsidiary of a foreign bank may, either individually or as part of a group, also be subject to non-viability requirements applied by the authorities in the overseas country of incorporation of the foreign bank parent, provided that the requirements are disclosed by the authorities, and issue documentation for the instrument discloses that the instrument is subject to potential loss as a result of the requirements. A locally-incorporated ADI that is a subsidiary of a foreign bank is permitted to, but not required to, provide for the application of a non-viability event based on non-viability requirements[55] applied to the foreign bank. As a result, a non-viability requirement applicable to the foreign bank, may function as a non-viability event for the ADI itself in relation to Additional Tier 1 Capital or Tier 2 Capital instruments issued by the ADI.
9.             Where a non-viability event occurs in accordance with this Attachment, the amount of conversion or write off of Additional Tier 1 or Tier 2 Capital instruments is to be determined in accordance with paragraphs 11 and 12 of this Attachment. If a non-viability event occurs as a result of only host or home regulator or statutory non-viability requirements (refer to paragraphs 2(c) and 2(c)(ii) of this Attachment), then the amount of conversion or write-off of Additional Tier 1 Capital or Tier 2 Capital instruments issued by a locally incorporated ADI that is a subsidiary of a foreign bank will be determined by the relevant host or home regulator or statutory requirements.
10.         The amount of an instrument that may be recognised in the ADI's Tier 1 and Total Capital is the minimum level of Common Equity Tier 1 Capital that would be generated by full conversion or write-off of the instrument on the occurrence of a non-viability event. In determining, at any point in time, the minimum level of Common Equity Tier 1 Capital that would be generated by conversion or write-off, the ADI must take into account any tax or other potential offsets which might impact the minimum level if conversion or write-off were to take place. Adjustments to the amount of an instrument included in Tier 1 Capital or Total Capital must be updated