Document ID: chunk:federal_register_of_legislation:F2024L01518:body:0:p1
Version: federal_register_of_legislation:F2024L01518
Segment Type: other
Provision Reference: 
Character Range: 0–4076

Banking (prudential standard) determination No. 6 of 2024

Prudential Standard APS 110 Capital Adequacy

Banking Act 1959

I, Sean Carmody, a delegate of APRA:

 1.                under subsection 11AF(3) of the Banking Act 1959 (the Act) REVOKE Banking (prudential standard) determination No. 4 of 2022, including Prudential Standard APS 110 Capital Adequacy made under that determination; and

 1.                under subsection 11AF(1) of the Act DETERMINE Prudential Standard APS 110 Capital Adequacy, in the form set out in the schedule, which applies to all ADIs and authorised NOHCs to the extent provided in paragraphs 2 to 4 of the prudential standard.

This instrument commences on 1 January 2025.

Dated: 27 November 2024

Sean Carmody
Executive Director
Policy and Advice Division
Interpretation
In this instrument:

APRA means the Australian Prudential Regulation Authority.

ADI and authorised NOHC have their respective meanings given in section 5 of the Act.

Schedule

Prudential Standard APS 110 Capital Adequacy comprises the document commencing on the following page.

Prudential Standard APS 110

Capital Adequacy
Objectives and key requirements of this Prudential Standard
This Prudential Standard requires an authorised deposit-taking institution (ADI) to maintain adequate capital, on both a Level 1 and Level 2 basis, to act as a buffer against the risk associated with its activities.
The ultimate responsibility for the prudent management of capital of an ADI rests with its Board of directors. The Board must ensure the ADI maintains an appropriate level and quality of capital commensurate with the type, amount and concentration of risks to which the ADI is exposed.
The key requirements of this Prudential Standard are that an ADI and any Level 2 group must:
     * have an Internal Capital Adequacy Assessment Process;
     * maintain required levels of regulatory capital;
     * operate a capital conservation buffer and a countercyclical capital buffer;
     * inform APRA of any adverse change in actual or anticipated capital adequacy; and
     * seek APRA's approval for any planned capital reductions.

Table of Contents
Authority...........................................................3
Application..........................................................3
Interpretation........................................................3
Definitions..........................................................3
Adjustments and exclusions...........................................4
Previous exercise of discretion........................................4
Responsibility for capital management..................................4
Internal Capital Adequacy Assessment Process.........................5
Minimum risk-based capital adequacy requirements......................7
Capital floor.........................................................8
Capital conservation buffer............................................8
Countercyclical capital buffer..........................................9
Minimum dollar amount of capital......................................9
Minimum leverage ratio requirement..................................10
Reductions in capital................................................10
Notification requirements............................................11
Attachment A – Risk-based regulatory capital ratios.....................12
Attachment B – Constraints on capital distributions......................14
Attachment C – Countercyclical capital buffer..........................16
Attachment D – Leverage ratio.......................................18

Authority
 1.              This Prudential Standard is made under section 11AF of the Banking Act 1959 (Banking Act).

Application
 1.              This Prudential Standard applies to all authorised deposit-taking institutions (ADIs) with the exception of:
         1.           foreign ADIs; or
         2.           purchased payment facility providers.
 2.              A reference to an ADI in this Prudential Standard, unless otherwise indicated,