Document ID: chunk:federal_register_of_legislation:F2022L01562:body:0:p30
Version: federal_register_of_legislation:F2022L01562
Segment Type: other
Provision Reference: 
Character Range: 78035–80815

Prudential Standard. Otherwise, up-front fee income received must not be added to capital.

Guarantees
32.         An ADI must deduct any guarantee, or credit derivative covering a credit exposure of the ADI, that provides for a materiality threshold below which no payment will be made in the event of a loss (refer to APS 112 and APS 113 for limits on the amounts an ADI is required to deduct).

Industry support schemes
33.         An ADI must deduct any non-repayable loans advanced by another ADI under APRA-certified industry support arrangements.

Securitisation
34.         An ADI must deduct:
(a)          the value of securitisation exposures subject to capital deduction under APS 120;
(b)          any increase in Common Equity Tier 1 Capital arising from any gain on sale (refer to APS 120);
(c)          any capitalised expected future income relating to securitisation activities prior to it being irrevocably received; and
(d)          the difference between the book value and the value realised for transfers of exposures to an SPV where the realised value is less than the book value, unless the difference has been written off to the ADI's profit and loss (refer to APS 120).

Shortfall in provisions for credit losses
35.         An ADI must deduct the shortfall in the stock of eligible provisions under the IRB approach to credit risk (refer to APS 113).

Provisions
36.         An ADI must deduct all provisions that have not already resulted in a charge to profit or loss by way of establishment of a provision in audited published financial accounts.

Superannuation funds
37.         An ADI must deduct any surplus in a defined benefit fund, of which the ADI is an employer-sponsor, unless otherwise approved by APRA. The surplus must be net of any associated deferred tax liability that would be extinguished if the assets involved become impaired or derecognised under Australian Accounting Standards. An ADI may apply to APRA to include a surplus as an asset for capital adequacy purposes where the ADI (or member of the ADI's group) employer-sponsor is able to demonstrate unrestricted and unfettered access to a fund surplus in a timely manner. Subject to APRA approval, an ADI may include the surplus in its risk-weighted assets at a 100 per cent risk weight rather than deducting the surplus.
38.         An ADI must deduct any deficit in a defined benefit superannuation fund of which an ADI (or at Level 2 any member of the Level 2 group) is an employer-sponsor and that is not already reflected in Common Equity Tier 1 Capital.

Other adjustments
39.         An ADI must deduct any other deductions required under any other ADI Prudential Standard.
40.         APRA may require an ADI to deduct from Common Equity Tier 1 Capital at Level 1 and