Document ID: chunk:federal_register_of_legislation:F2022L01566:body:0:p2
Version: federal_register_of_legislation:F2022L01566
Segment Type: other
Provision Reference: 
Character Range: 2891–5986

Standard or Reporting Standard as in force from time to time.[1]

Scope

    7.             This Prudential Standard does not apply to a bond, note or other debenture, liabilities in relation to which are secured wholly by assets that are not in Australia.

    8.             A covered bond is not a securitisation for the purposes of Prudential Standard APS 120 Securitisation (APS 120).

Definitions

    9.             The following definition is used in this Prudential Standard:

       (a)        assets in Australia - means assets in Australia calculated in accordance with paragraph 42 of this Prudential Standard.

Adjustments and exclusions

    10.         APRA may adjust or exclude a specific prudential requirement in this Prudential Standard in relation to one or more specified ADIs.[2]

Previous exercise of discretion

11.         An ADI must contact APRA if it seeks to place reliance, for the purposes of complying with this Prudential Standard, on a previous exemption or other exercise of discretion by APRA under a previous version of this Prudential Standard.

Key principles

    12.         The Board and senior management of an issuing ADI must establish and implement policies and procedures relating to:

       (a)        decisions to issue covered bonds and the structuring of covered bond issuance;

       (b)        the ADI's dealings with covered bond special purpose vehicles (including cover pools); and

       (c)        the management of exposures involved in the issuance of covered bonds.

    13.         The policies and procedures established by an ADI relating to its issuance of covered bonds must include:

       (a)        appropriate risk management systems to identify, measure, monitor and manage the risks associated with the ADI's issuance of covered bonds;

       (b)        how the ADI will monitor the effects of its issuance of covered bonds on its risk profile, including exposures to the covered bond special purpose vehicle;

       (c)        consideration, under stress scenarios, of the impact on the ADI of contractual obligations to maintain collateral levels required for covered bonds;

       (d)        assessment of the effect, including under stress scenarios,  of covered bond issuance on the ability of the ADI to raise other sources of funding and the cost of such funding; and

       (e)        how the ADI will ensure that it is meeting the requirements of this Prudential Standard and of Division 3A of Part II of the Banking Act.

    14.         The documentation associated with a covered bond issuance must clearly set out:

       (a)        the events of default that would enable covered bond holders to access collateral held in the cover pool;

       (b)        that claims by covered bond holders on the covered bond special purpose vehicle are limited to assets in the cover pool;

       (c)        how assets forming part of the cover pool are identified;

       (d)        the interests of the issuing ADI in assets held by the covered bond special purpose vehicle and the