Document ID: chunk:federal_register_of_legislation:F2024L01074:body:0:p47
Version: federal_register_of_legislation:F2024L01074
Segment Type: other
Provision Reference: 
Character Range: 127889–131079

must be performed immediately;
        8.           the ADI must have clearly documented credit policies and procedures that detail the:
                1.             types of physical collateral accepted by the ADI, and policies and practices in respect of the appropriate amount of each type of collateral relative to the exposure amount;
                2.          ADI's ability to liquidate the collateral readily; and
                3.        ADI's ability to objectively establish a price or market value of the collateral, frequency with which the value can be readily obtained, and the volatility of the value of the collateral. The periodic revaluation process must pay particular attention to 'fashion-sensitive' collateral to ensure that valuations are appropriately adjusted downward for fashion, or model-year, obsolescence as well as physical obsolescence or deterioration;
        9.             the ADI ensures that the collateral is adequately insured; and
       10.             the ADI monitors the risk of environmental liability arising in respect of the collateral.
 2.              An ADI must have clearly documented policies and procedures for assessing each type of physical collateral against the conditions detailed in paragraph 7 of this Attachment. For this purpose, the ADI must consider:
        1.           in relation to sub-paragraph 7(a) of this Attachment, the attributes of the collateral such as the degree of customisation or standardisation, location of the market in which the collateral is expected to be exchanged, age, condition and reusability of the collateral, transaction costs (including the time to transaction), and the prevalence of brokers and dealers; and
        2.           where applicable, in relation to sub-paragraph 7(b) of this Attachment, the credibility of the appraiser and the reliability of their appraisals.
 3.              An ADI must maintain a register of physical collateral deemed to be eligible collateral based on an assessment against the conditions detailed in paragraph 7 of this Attachment. The register must be kept up-to-date and made available to APRA upon request.

General security agreements
 1.          Where an ADI's exposure is secured by a general security agreement (or an equivalent form of floating charge) over both eligible collateral and other types of collateral, it may only recognise the security interest over eligible collateral. Recognition is conditional on the eligible collateral meeting the relevant operational requirements detailed in this Attachment.

Recognition of leasing
 1.          In addition to the minimum requirements for the eligible collateral type, an ADI must also satisfy the following requirements in relation to its lease exposures:
        1.           robust risk management practices with respect to the location of the leased asset, its use, age and planned obsolescence;
        2.           a robust legal framework establishing the ADI's legal ownership of the leased asset and its ability to exercise its rights as owner in a timely manner; and
        3.           the difference between the rate of depreciation of the leased asset and the rate of