Document ID: chunk:federal_register_of_legislation:F2022L01620:front:0:p7
Version: federal_register_of_legislation:F2022L01620
Segment Type: other
Provision Reference: 
Character Range: 17309–20272

of its strategy for each currency in which it has material activities, considering potential constraints in times of stress.

Funding strategy

    44.         An ADI must:

       (a)          develop and document a three-year funding strategy, which must be provided to APRA on request;

       (b)          maintain an ongoing presence in its chosen funding markets and strong relationships with funds providers; and

       (c)          regularly gauge its capacity to raise funds quickly. It must identify the main factors that affect its ability to raise funds and monitor those factors closely to ensure that estimates of fund‑raising capacity remain valid.

    45.         The funding strategy must be reviewed and approved by the Board, at least annually, and supported by robust assumptions in line with the ADI's liquidity management strategy and business objectives.

    46.         The funding strategy must be reviewed and updated, at least annually, to account for, at a minimum, changed funding conditions and/or a change in the ADI's strategy. An ADI must advise APRA of any material changes to the ADI's funding strategy.

Contingency funding plan

    47.         An ADI must have a formal contingency funding plan that clearly sets out the strategies for addressing liquidity shortfalls in stressed situations. The plan must outline policies to manage a range of stress environments, establish clear lines of responsibility and include clear invocation and escalation procedures.

    48.         An ADI's contingency funding plan must be commensurate with its complexity, risk profile, scope of operations and role in the financial systems in which it operates. The plan must articulate available contingency funding sources and the amount of funds an ADI estimates can be derived from these sources, clear escalation/prioritisation procedures detailing when and how each of the actions can and must be activated and the lead time needed to tap additional funds from each of the contingency sources. The contingency funding plan must provide a framework with a high degree of flexibility so that an ADI can respond quickly in a variety of situations.

    49.         The plan's design, scope and procedures must be closely integrated with the ADI's ongoing analysis of liquidity risk and with the assumptions used in its stress tests and the results of those stress tests. As such, the plan must address issues over a range of different time horizons, including intraday.

    50.         For an ADI that has retail deposits, the plan must address a retail deposit run and must include measures to repay retail depositors as soon as practicable. The retail run contingency plan must not rely upon closing distribution channels to retail depositors. The retail run contingency plan must seek to ensure that in the event of a loss of market confidence in the ADI, retail depositors wishing to retrieve their deposits may do so as