Document ID: chunk:federal_register_of_legislation:F2023L00684:body:0:p11
Version: federal_register_of_legislation:F2023L00684
Segment Type: other
Provision Reference: 
Character Range: 25906–28726

1 and Level 2 capital adequacy, APRA will have regard to the level of capital adequacy of individual group members of a group to which the regulated institution belongs, including any limitations in the amount of capital that may be readily extracted from individual group members to provide support, if required, to recapitalise the regulated institution or other group members.
 7. In measuring the capital base at Level 2, a regulated institution must exclude any capital instrument issued by a member of the Level 2 group where the obligations under that instrument are secured, guaranteed, or subject to any other arrangement provided by a member of the group that legally or economically enhances the seniority of claims of investors.

Holding of capital instruments in group members by other group members
 1. Capital instruments of a regulated institution, a member of a group headed by a regulated institution, or a NOHC at Level 2 that are held as direct investments by a vehicle, subject to consolidation within the regulated institution's financial statements in accordance with Australian Accounting Standards, may be included in Common Equity Tier 1 Capital, Additional Tier 1 Capital, Additional and Tier 2 Capital (on both a Level 1 and Level 2 basis, as appropriate) only if:
 2. the regulated institution (or relevant vehicle, other than a parent of the regulated institution, in respect of its own holdings of these instruments) did not fund the acquisition of the capital instruments (i.e. acquisition of capital instruments is funded by third parties such as life insurance policyholders or third-party investors);
 3. the risk and rewards associated with investments are borne primarily by third parties;
 4. the regulated institution can demonstrate to APRA, if required, that decisions to acquire or sell such capital instruments are made independently of the issuer of the capital instruments and in the interests of the third parties who primarily bear the risks and rewards of the investments in the instruments; and
 5. the instruments are not held for the purposes of an employee share-based remuneration scheme.
 6. Direct investments in shares of a regulated institution by an SPV (e.g. a trust) established under a share-based employee remuneration scheme may be included in the regulated institution's Common Equity Tier 1 Capital only if:
 7. the shares issued to the SPV represent ordinary shares of the regulated institution;
 8. the amount included in Common Equity Tier 1 Capital is matched by an equivalent charge to profit or loss of the regulated institution for expensing the issue or funding the acquisition of ordinary shares by the vehicle; and
 9. the ordinary shares issued cannot be converted to payment in another form (e.g. cash).
10. If the requirements in paragraph 47