Document ID: chunk:federal_register_of_legislation:F2022L01562:body:0:p25
Version: federal_register_of_legislation:F2022L01562
Segment Type: other
Provision Reference: 
Character Range: 64800–67716

must, unless the value of such equity exposures and other capital support is otherwise required to be deducted from Common Equity Tier 1 Capital under this Prudential Standard, be reversed prior to the calculation of risk-based capital ratios at Level 2; that is, any retained earnings, other reserves or minority interests of these entities included in Common Equity Tier 1 Capital, and any other items impacting on any other Level 2 category of capital as a result of the accounting consolidation, must be removed from that category for capital adequacy purposes. Goodwill and any other intangibles component of the investments in non-consolidated subsidiaries must be deducted from the ADI's Common Equity Tier 1 Capital at Level 2.
14.         In considering whether a facility, including a guarantee, provided to a related entity constitutes capital support, APRA will have regard to, amongst other things, whether:
(a)          the facility represents a recognised capital instrument or is otherwise accepted as standing in place of capital required to be held by a related entity;
(b)          the provider of the facility, in terms of either repayment or maturity, ranks below other senior unsecured or unsubordinated creditors; or
(c)          the facility is provided by an ADI or other member of a Level 2 group and the funding provided flows through one member of the group (including any SPV) to another member of the group and the funding received by the second entity meets either (a) or (b) of this paragraph.
15.         In considering whether a facility (including a guarantee) provided to an unrelated entity[21] constitutes capital support, APRA will have regard to, amongst other things, whether:
(a)          the facility represents a recognised capital instrument or is otherwise accepted as standing in place of capital required to be held by the entity; or
(b)          the provider of the facility is subordinated to other creditors, and the facility is not otherwise captured by provisions in APS 112 or APS 113 that consider the level of subordination in determining capital requirements for such facilities.
16.         If a facility covered in paragraphs 14 or 15 of this Attachment constitutes a form of capital support, the ADI must apply the deductions in accordance with the provisions in this Attachment dealing with other capital support.

Holdings of own capital instruments
17.         Unless otherwise indicated, an ADI must deduct from the corresponding category of capital, holdings of its own capital instruments, whether held directly or indirectly[22], unless otherwise exempted by APRA or unless eliminated under Australian Accounting Standards from the relevant category of capital. This deduction must include any capital instruments that the ADI (or other members of the Level 2 group) could be contractually obliged to purchase, regardless of whether the holdings are