Document ID: chunk:federal_register_of_legislation:F2020L01591:body:0:p8
Version: federal_register_of_legislation:F2020L01591
Segment Type: other
Provision Reference: 
Character Range: 18812–21661

more related entities having regard to the ADI's individual circumstances.

Measuring exposures to related entities
34.         An ADI's exposure to a related entity is the aggregate of all claims, commitments and contingent liabilities arising from on- and off-balance sheet transactions in both the banking and trading books with the related entity, and must be measured in accordance with Attachment A to APS 221.
35.         An ADI's exposure to a regulated related entity must be measured in accordance with paragraph 34 of this Prudential Standard and must include any equity exposures and capital support provided to the regulated related entity (including any off-balance sheet exposure arising from guarantee of capital instruments issued by the related entity) that has not been deducted from the ADI's Level 1 capital for capital adequacy purposes.
36.         Where an ADI is required to apply the look-through requirement in Attachment A to APS 221 for an exposure to a structured vehicle that is a related entity and the ADI has an exposure to an underlying asset that is another related entity of the ADI, the ADI must recognise all of these exposures under the limits in paragraph 29 of this Prudential Standard.
37.         An ADI's exposure to a related entity excludes the exposures specified in paragraph 18 of APS 221.

Prior notification requirements
38.         An ADI must notify APRA prior to:
(a)          establishing or acquiring a subsidiary other than an entity which is to be used purely as a special purpose vehicle to provide finance to the ADI;
(b)          committing to any proposal to acquire (whether directly or indirectly) greater than, or equal to, 20 per cent of the equity interest in an entity; or
(c)          committing to any proposed exposure to a related entity that is greater than, or equal to, 10 per cent of the ADI's Tier 1 Capital.
39.         APRA may require an ADI to not proceed with a transaction that has been subject to the prior notification requirements in paragraph 38 of this Prudential Standard, or impose prudential conditions on the transaction or higher capital adequacy requirements on the exposure, if APRA is not satisfied with the ADI's risk assessment. Factors that APRA will consider include, but are not limited to:
(a)          the ADI's assessment of the factors in paragraph 13 of this Prudential Standard;
(b)          the adequacy of the ADI's systems, controls and resources to identify, measure, monitor, manage and report exposures and risks arising from the activity; and
(c)          whether the transaction exposes the ADI to substantial contagion risks or hinders effective supervision.
40.         APRA may determine that an ADI is not required to notify APRA prior to committing to proposed transactions that are below a specified threshold, having regard to