Document ID: chunk:federal_register_of_legislation:F2023L00684:body:0:p26
Version: federal_register_of_legislation:F2023L00684
Segment Type: other
Provision Reference: 
Character Range: 65214–67959

1. specify the number of mutual equity interests to be received upon conversion, or specify the conversion formula for determining the number of mutual equity interests received;
     2. provide for the number of mutual equity interests to be received under the formula specified in (a) of this paragraph to be capable of being ascertained immediately and objectively; and
     3. set the maximum number of mutual equity interests received such that the aggregate nominal value of the interests received cannot exceed, at the date of conversion, the nominal value of the Additional Tier 1 Capital instrument converted.
18. Conversion must generate an unequivocal addition to Common Equity Tier 1 Capital of the regulated institution under Australian Accounting Standards.
19. In issuing Additional Tier 1 Capital instruments a regulated institution may, within the category of Additional Tier 1 Capital:
20. differentiate between instruments as to whether an instrument is required to convert or be written-off in the first instance;
21. provide for a ranking under which Additional Tier 1 Capital instruments will be converted or written off; and
22. where conversion or write-off of capital instruments is required at Level 2, the Level 2 insurance group may provide for a ranking under which Additional Tier 1 Capital instruments issued by individual members of the group may need to be converted or written off. This would be subject to any requirements for conversion or write-off of Additional Tier 1 Capital instruments required to be undertaken on a Level 1 basis.
23. Where an Additional Tier 1 Capital instrument provides for a write-off mechanism, this mechanism must be structured so that:
24. the claim of the holder of the instrument on liquidation of the issuer is reduced to, or below, the value of the written-off instrument;
25. the amount of the instrument that may be paid if a call is exercised is irrevocably reduced to the value of the instrument after write-off;
26. there is an immediate and unequivocal addition to the Common Equity Tier 1 Capital of the regulated institution; and
27. the distribution or payments payable on the instrument must be permanently reduced (i.e. distributions or payments must be calculated at no more than the rate set for the written-off value of the instrument).
28. The instrument must not include a mechanism that would require a holder to sell the instrument to the issuer or a related entity of the issuer other than as part of a call option or redemption of the instrument. A mechanism that requires a holder to sell the instrument to a nominated party other than the issuer or a related entity of the issuer will not constitute an incentive to redeem provided there is at least two