Document ID: chunk:federal_register_of_legislation:F2023L00684:body:0:p33
Version: federal_register_of_legislation:F2023L00684
Segment Type: other
Provision Reference: 
Character Range: 82934–85691

A Tier 2 capital instrument must provide for the immediate, automatic and permanent revocation of a call notice upon a non-viability event (refer to Attachment E to this Prudential Standard). A call option cannot be exercised in anticipation of a non-viability event.
 5. A Tier 2 Capital instrument may only provide for a call within the first five years of issuance as a result of a tax or regulatory event. A tax or regulatory event is confined to:
 6. changes in statute and regulations (and judicial and administrative actions pertaining to the application of a statute or regulations) which impact the specific capital instrument;
 7. changes related only to the jurisdictions relevant to the instrument;
 8. changes that have occurred, or will occur, as opposed to changes that may occur; or
 9. changes which impact the issuer of the affected capital instrument. Changes in tax or regulation impacting the holder of the capital instrument will not constitute a tax or regulatory event for the purposes of this Attachment.
10. APRA may require a regulated institution not to exercise a call where it relates to a tax or regulatory event if APRA forms the view that the regulated institution was in a position to anticipate the tax or regulatory event when the instrument was issued. In order for a call to be exercised the issuer must comply with the provisions in paragraph 7 of this Attachment.
11. Where a Tier 2 Capital instrument provides for conversion into ordinary shares[39], the issue document must:
12. specify the number of ordinary shares to be received upon conversion or specify the conversion formulae for determining the number of ordinary shares received;
13. provide for the number of ordinary shares to be received under the conversion formula specified in (a) of this paragraph to be capable of being ascertained immediately and objectively;
14. set the maximum number of ordinary shares received so as not to exceed the price to the Tier 2 Capital instrument at the time of its issue divided by 20 per cent of the regulated institution's[40] ordinary share price[41] at the same time. However, this cap does not apply if the only holder of the converting capital instrument is a listed parent which wholly-owns the issuer of the capital instrument. In calculating the ordinary share price at time of issue:
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         1. adjustments may be made for subsequent ordinary share splits, bonus issues and share consolidations;
         2. adjustments may only be made for transactions that change the number of shares on issue without involving an exchange of value and which have no impact on capital;[42]
         3. adjustments must exclude transactions involving cash payments or other compensation to, or by, holder of the