Document ID: chunk:federal_register_of_legislation:F2022L01562:body:0:p10
Version: federal_register_of_legislation:F2022L01562
Segment Type: other
Provision Reference: 
Character Range: 24243–27168

Attachment C to this Prudential Standard) where:
(i)            the instruments would, if issued by the ADI, meet the criteria in Attachment G to this Prudential Standard;
(ii)         the instruments meet the requirements for loss absorption at the point of non-viability set out in Attachment H to this Prudential Standard;
(c)          subject to paragraphs 43 and 44 of this Prudential Standard, provisions held against non-defaulted exposures that represent a purely forward-looking amount for future losses that are, presently unidentified, unless APRA determines otherwise; and
(d)          regulatory adjustments applied in the calculation of Tier 2 Capital in accordance with Attachment D to this Prudential Standard.
43.         For the purposes of paragraph 42(c) of this Prudential Standard, provisions may be included in Tier 2 Capital gross of tax effects up to the following limits:
(a)          for an ADI using the Standardised Approach to credit risk: a maximum of 1.25 per cent of total credit risk-weighted assets[7] calculated under Prudential Standard APS 112 Capital Adequacy: Standardised Approach to Credit Risk (APS 112);
(b)          for an ADI using the Internal ratings-based (IRB) approach to credit risk: a maximum of 0.6 per cent of total credit risk-weighted assets[8] for non-defaulted exposures, to the extent that total eligible provisions exceed total expected losses;
(c)          for an ADI using a partial IRB approach to credit risk: the sum of provisions proportionately based on the limits in (a) and (b) of this paragraph; and
(d)          where it is not possible for the ADI to determine whether the provisions relate to assets under the standardised or IRB approaches to credit risk: allocation on a basis that is reasonable and consistent.
44.         If the provisions referred to in paragraph 42(c) of this Prudential Standard have not already resulted in a charge to profit or loss (e.g. by way of establishment of a provision in audited published financial accounts), the provisions reported for capital adequacy purposes must be matched by a corresponding reduction in an ADI's Common Equity Tier 1 Capital.

Additional Tier 1 Capital or Tier 2 Capital issued overseas by ADIs or subsidiaries
45.         Additional Tier 1 Capital instruments and Tier 2 Capital instruments may be issued by an ADI, or a consolidated subsidiary in the Level 2 group, either in its country of incorporation or through a branch in another country, provided the instrument:
(a)          constitutes an obligation of the ADI or of the consolidated subsidiary itself at all times;
(b)          is freely available to absorb losses on a going concern (Additional Tier 1 Capital only) and gone concern basis across all of the operations of the ADI, or the consolidated subsidiary that issued the instrument; and
(c)          meets all of the requirements of this Prudential Standard for inclusion