Document ID: chunk:federal_register_of_legislation:F2024L01319:body:0:p3
Version: federal_register_of_legislation:F2024L01319
Segment Type: other
Provision Reference: 
Character Range: 5861–8902

size, business mix and complexity of the RSE licensee's business operations.
 3.          If APRA considers that the ORFR target amount and/or tolerance limit set by the RSE licensee does not adequately reflect the requirements of this Prudential Standard, APRA may require an RSE licensee to:
         1.           meet an ORFR target amount determined by APRA, within a specified time; and/or
         2.           adopt a tolerance limit determined by APRA.

Use of ORFR financial resources
 1.          An RSE licensee must only use ORFR financial resources for one or more of the following:
         1.           to address operational risks that could reasonably be considered to have caused or could cause one or more beneficiaries in an RSE within the RSE licensee's business operations to sustain a loss, or to be deprived of a gain to which they otherwise would have been entitled;
         2.           to meet the requirements of Prudential Standard CPS 230 Operational Risk Management for the effective management and prevention of operational risk incidents, including the remediation of identified material weaknesses and maintenance of critical operations within tolerance levels through severe disruption; and
         3.           to reduce a surplus where ORFR financial resources are materially larger than the ORFR target amount.

Access to ORFR financial resources
 1.          To be eligible to meet the ORFR target amount, any ORFR financial resources held as an operational risk reserve within an RSE must:
         1.           be separately identifiable from member accounts and reserves held in the RSE for other purposes; and
         2.           be unrestricted and readily available to address operational risks in a timely manner.[5]
 2.          To be eligible to be used to meet the ORFR target amount, any ORFR financial resources held as trustee capital must be held in a form that is equivalent to Common Equity Tier 1 Capital.[6]

Shortfall management
 1.          Where the level of ORFR financial resources falls below the tolerance limit, an RSE licensee must implement a replenishment plan and replenish the ORFR financial resources. Replenishment must occur within a period and in a manner the RSE licensee determines will ensure that the RSE licensee acts fairly in dealing with beneficiaries and minimises the risk of adverse outcomes for beneficiaries.[7] The replenishment plan must, at a minimum, explain:
         1.           how the shortfall has arisen;
         2.           the amounts that apply in relation to each RSE;
         3.           how the RSE licensee will replenish the ORFR financial resources, including the source of funding; and
         4.           the expected date for the RSE licensee to again meet the ORFR target amount.
 2.          An RSE licensee's replenishment plan must be approved by the Board prior to implementation.
 3.          APRA may require an RSE licensee to revise its replenishment plan if APRA considers that the plan does not comply with the