Document ID: chunk:federal_register_of_legislation:F2016L01433:body:0:p4
Version: federal_register_of_legislation:F2016L01433
Segment Type: other
Provision Reference: 
Character Range: 8120–11053

participation of prudentially regulated institutions in Level 3 group-wide operations;
(vi)        processes to ensure the transparency of dealings with entities external to the Level 3 group that are associated with ITEs;
(vii)     thresholds and procedures for reporting material changes to the Board of the Level 3 Head, in both formal reporting cycles and outside formal reporting cycles; and
(viii)   a timetable for a regular review of the reports by the Board of the Level 3 Head.

Participation in group-wide operations
13.         A Level 3 Head must establish policies and procedures to address risks posed to the group from the participation of any prudentially regulated institution in Level 3 group-wide operations including, but not limited to, sharing premises with other Level 3 institutions, centralising back-office functions or outsourcing services to other Level 3 institutions.
14.         Where a prudentially regulated institution participates in Level 3 group-wide activities, a Level 3 Head must:
(a)          consider the risks posed to that institution on a standalone basis as a result of its participation in such activities;
(b)          be satisfied that these ITEs are appropriately addressed by the Level 3 group's risk management policies;
(c)          ensure dealings with other parties arising from participation in group-wide operations are appropriately documented in written service agreements[2];
(d)          facilitate APRA being able to obtain information required for the supervision of either individual prudentially regulated institutions or the Level 3 group as a whole; and
(e)          ensure that there is a clear obligation under the written arrangements for any service provider to comply with any direction given by APRA in relation to the operations of any prudentially regulated institution within the Level 3 group.

Internal reporting systems
15.         A Level 3 Head's management information systems must incorporate reporting systems in relation to ITEs across the Level 3 group.[3]
16.         Reports on material ITEs must be provided to APRA on request.

Limits and approvals
17.         Where, in APRA's view, the Level 3 group is exposed to a significant level of ITEs, APRA may require a Level 3 Head to limit or reduce the Level 3 group's level of ITEs. APRA may also determine how a Level 3 Head must calculate the ITEs. In determining any requirement to limit or reduce the Level 3 group's level of ITEs, or how a Level 3 Head must calculate an ITE, APRA may take account of the following factors:
(a)          whether the Level 3 group has been acting in a manner that is consistent with the ITE policy;
(b)          the characteristics of ITEs, including their number, size and nature;
(c)          the characteristics of the Level 3 group, including the nature of its business and the experience of its management; and
(d)          other relevant factors to be