Document ID: chunk:federal_register_of_legislation:F2024L01518:body:0:p3
Version: federal_register_of_legislation:F2024L01518
Segment Type: other
Provision Reference: 
Character Range: 6495–9541

prospective changes in the ADI's risk profile and capital holdings.
 2.          An ADI that is a member of a group may be exposed to risks, including reputational and contagion risk, through its association with other members of the group. Problems arising in other group members may compromise the financial and operational position of the ADI. The Board, in determining the capital adequacy of the ADI at Level 1, must have regard to:
         1.           risks posed to the ADI by other members of the group, including the impact on the ability of the ADI to raise funding and additional capital should the need arise;
         2.           obligations, both direct and indirect, arising from the ADI's association with group members that could give rise to a call on the capital of the ADI; and
         3.           the ability to freely transfer capital (including situations where the group is under financial or other forms of stress) from members of the group to recapitalise the ADI or other members of the group. This includes consideration of:
                 1.             the integration of business operations within the group;
                 2.          the importance of members of the group to the group;
                 3.        the impact of cross-border jurisdictional issues;
                 4.         differences in legislative and regulatory requirements that may apply to group members; and
                 5.           the impact of taxation and other factors on the ability to realise investments in, or transfer surplus capital from, group members.

Internal Capital Adequacy Assessment Process
 1.          An ADI must have an Internal Capital Adequacy Assessment Process (ICAAP) that must be:
         1.           adequately documented, with the documentation made available to APRA on request; and
         2.           approved by the ADI's Board initially, and when significant changes are made.
 2.          An ADI's ICAAP must be appropriate to the ADI's size, business mix and complexity of its operations and group structure.
 3.          An ADI that is part of a group may rely on the ICAAP of the group provided that the Board of the ADI is satisfied that the group ICAAP meets the criteria in paragraph 17 of this Prudential Standard in respect of the ADI.
 4.          The ICAAP must include at a minimum:
         1.           adequate policies, procedures, systems, controls and personnel to identify, measure, monitor and manage the risks arising from the ADI's activities on a continuous basis, and the capital held against such risks;
         2.           a strategy for ensuring adequate capital is maintained over time, including specific capital targets set out in the context of the ADI's risk profile, the ADI's risk appetite and Regulatory Capital requirements. This includes plans for how target levels of capital are to be met and the means available for sourcing additional capital where required;
         3.           actions and procedures for monitoring the ADI's compliance