Document ID: chunk:federal_register_of_legislation:F2022L01562:body:0:p31
Version: federal_register_of_legislation:F2022L01562
Segment Type: other
Provision Reference: 
Character Range: 80570–83352

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 Level 2 an amount to cover undercapitalisation of a subsidiary (or subsidiaries). An ADI may be required to provide to APRA details of, amongst other things:
(a)          the size and scale of the operations of the non-consolidated subsidiary;
(b)          the materiality of the subsidiary's operations to group income and strategic outlook;
(c)          the level of net tangible assets of the subsidiary;
(d)          the risk profile of the subsidiary;
(e)          the level of exposure of the ADI on a Level 1 basis and of the Level 2 group to the subsidiary; and
(f)           the size of any identified capital shortfall and the likelihood of such a shortfall being remedied within a reasonable period of time.

Attachment E -        Criteria for inclusion in Additional Tier 1 Capital
     1. To be classified as Additional Tier 1 Capital, an instrument must satisfy all of the criteria in this Attachment.
     2. The instrument must be paid-up and the amount must be irrevocably received by the issuer.
     3. The instrument represents, prior to any conversion to Common Equity Tier 1 Capital (refer to Attachment F and Attachment H to this Prudential Standard), the most subordinated claim in liquidation of the issuer after Common Equity Tier 1 Capital instruments. Where an issuer is a holding company, any claim in relation to the instrument must be subordinate to the claims of general creditors of the holding company.
     4. The paid-up amount of the instrument, or any future payments related to the instrument, is neither secured, nor covered by a guarantee of the issuer or related entity, or other arrangement that legally or economically enhances the seniority of the holder's claim. The instrument may not be secured or otherwise subject to netting or offset claims on behalf of the holder or issuer of the instrument.
     5. The principal amount of the instrument is perpetual (i.e. it has no maturity date).[28]
     6. The instrument contains no step-ups or other incentives to redeem. The issuer and any other member of a group to which the issuer belongs must not create an expectation at issuance that the instrument will be bought back, redeemed or cancelled. The contractual terms of the instrument must not provide any feature that might give rise to such an expectation.[29]
7.             The instrument may only be callable at the initiative of the issuer and only after a minimum of five years from the date on which the issuer irrevocably receives the proceeds of payment for the instrument. The