Document ID: chunk:federal_register_of_legislation:F2020L01591:body:0:p4
Version: federal_register_of_legislation:F2020L01591
Segment Type: other
Provision Reference: 
Character Range: 8253–11290

and the complexity of the group structure;
(b)          the adequacy of systems, controls and risk management across the group;
(c)          the level of financial and operational interdependence across the group;
(d)          whether other members of the group are regulated entities (i.e. regulated by APRA or by an equivalent prudential regulator overseas);
(e)          whether the location of the ADI's subsidiaries undermines the ability of its subsidiaries to be resolved in a sound and timely manner; and
(f)           badging and product distribution arrangements that might link the ADI's reputation to other entities.
14.         An ADI's policies on dealings and associations with related entities must be based on an assessment of material risks to the ADI and, at a minimum, include:
(a)          a requirement that the ADI deal with related entities on an arm's-length basis and on market terms and conditions;
(b)          limits on exposures to related entities at both an individual and aggregate level, which are determined having regard to:
(i)            the level that would be approved for unrelated entities of an equivalent credit status; and
(ii)         the impact on the ADI's stand-alone capital and liquidity positions in the event of a failure of a related entity;
(c)          the circumstances in which the limits relating to exposures and write-offs may be exceeded and the authority and processes required for approving such excesses;
(d)          the authority and processes required for the approval and maintenance of group structures, where the ADI is the head of a group, and establishing and acquiring subsidiaries;
(e)          procedures to address risks arising from participation in group operations (refer to paragraphs 27 and 28 of this Prudential Standard);
(f)           procedures for resolving conflicts of interest arising from dealings with related entities;
(g)          processes to ensure the transparency of third-party dealings that are connected with related entities; and
(h)          procedures to address material risks to the ADI arising from the ADI distributing financial products of another counterparty and vice-versa.
15.         An ADI's Board must first approve the terms and conditions agreed to by an ADI in relation to dealings with its related entities that are not consistent with terms and conditions that would be negotiated with an unrelated entity with justifications fully and clearly documented in a register.
16.         An ADI must not:
(a)          have unlimited exposures to related entities either in aggregate or at an individual entity level; or
(b)          agree to cross-default provisions whereby a default by a related entity on an obligation, whether financial or otherwise, triggers or is deemed to trigger a default by the ADI on its obligations.
17.         An ADI must implement adequate systems and controls to identify, measure, monitor, manage and report exposures arising from dealings with related entities and step-in risk entities.