Document ID: chunk:federal_register_of_legislation:F2016L01433:body:0:p2
Version: federal_register_of_legislation:F2016L01433
Segment Type: other
Provision Reference: 
Character Range: 2736–5665

requirements of this Prudential Standard are that a Level 3 Head must:
     * have a policy for the Level 3 group that deals with the measurement, management and monitoring of, and reporting on, intra-group transactions and exposures between members of the group;
     * develop and implement effective systems and processes to manage, monitor and report on intra-group transactions and exposures; and
     * meet minimum requirements with respect to dealings between institutions in the Level 3 group and certain related matters.
The requirements in this Prudential Standard are in addition to the obligations imposed on prudentially regulated institutions under other Prudential Standards.

Authority
     1. This Prudential Standard is made under:
(a)          section 11AF of the Banking Act 1959 (Banking Act);
(b)          section 32 of the Insurance Act 1973 (Insurance Act); and
(c)          section 230A of the Life Insurance Act 1995 (Life Insurance Act).

Application
2.             This Prudential Standard applies to each Level 3 Head.
3.             This Prudential Standard commences on 1 July 2017.

Interpretation
4.             Terms that are defined in Prudential Standard 3PS 001 Definitions appear in bold the first time they are used in this Prudential Standard.
5.             Where this Prudential Standard provides for APRA to exercise a power or discretion, this power or discretion is to be exercised in writing.

Intra-group transactions and exposures
6.             For the purposes of this Prudential Standard, an intra-group transaction and exposure (ITE) is the total exposure, including on- and off-balance sheet exposures, of a Level 3 institution to another Level 3 institution within the same Level 3 group.
7.             A Level 3 Head must have an 'ITE policy' that addresses all material risks arising in relation to ITEs associated with operations undertaken by Level 3 institutions in the Level 3 group. The policy must include systems and procedures to identify, measure, monitor, evaluate, report and control or mitigate all material risks arising from ITEs between Level 3 institutions in the group.
8.             A Level 3 Head must conduct forward-looking scenario analysis and stress testing of the Level 3 group's material ITEs. The analysis must assess the impact of changes in market conditions and key risk factors on these ITEs, and how these changes impact the group's risk profile, capital strength and earnings.
9.             The management of ITEs must be a part of a Level 3 group's risk management framework.[1]

The role of the Board of a Level 3 Head
10.         The Board of a Level 3 Head must:
(a)          approve the ITE policy for the Level 3 group;
(b)          ensure that adequate systems and controls are in place to identify, measure, manage, monitor and report on material ITEs in the Level 3 group in a timely manner and that those systems and controls