Document ID: chunk:federal_register_of_legislation:F2022L01576:body:0:p22
Version: federal_register_of_legislation:F2022L01576
Segment Type: other
Provision Reference: 
Character Range: 59723–62645

provisions must be deducted from an ADI's Common Equity Tier 1 Capital unless the amount of the prescribed provision has otherwise not been included in Common Equity Tier 1 Capital.
4.             Where the Board or senior management of an ADI believe that the prescribed provisions calculated in accordance with this Prudential Standard do not reasonably address assessed loss outcomes, they must report additional specific provisions. The level of specific provisions required will depend on the type of exposure and term of payments past-due or the period of irregularity in cash flows due on an exposure.
5.             Alternatively, where an ADI can satisfy APRA that the level of provisioning prescribed under this Attachment is higher than it might prudently require, the ADI may seek APRA's written agreement to report a lower level of such provisions as specific provisions. The difference between the level of provisions prescribed under this Attachment and that which it is agreed an ADI might prudently report may instead be included as part of the ADI's provisions held against performing exposures that represent unidentified losses or, alternatively, may be returned to Common Equity Tier 1 Capital as agreed with APRA. An ADI will need to fully satisfy APRA that its estimates of its provisioning needs are both prudent and comprehensive.
6.             An ADI subject to prescribed provisioning arrangements must determine its specific provisions for capital and APRA reporting purposes in accordance with the four categories of past-due exposures defined in this Attachment. The prescribed provisions calculated represent a minimum level of provisioning that an ADI must report, subject to paragraph 5 of this Attachment.
7.             Where an exposure maintained by an ADI utilising prescribed provisioning does not fall into the four categories of exposures outlined in this Attachment and the exposure is a non-performing exposure, the amount of provision to be held against this item must reflect the risk involved and must be agreed with APRA.

Categories of past–due exposures

Category One exposures
8.             No prescribed provisions are mandated for Category One exposures.
9.             Category One exposures are well-secured (refer to paragraphs 18 and 19 of this Attachment) and include:
       (a)          an exposure that is secured by a registered first mortgage against a residential property and is insured by an eligible lenders mortgage insurer (as defined in APS 112) for 100 per cent of the outstanding balance;
       (b)          an exposure that is secured by a registered first mortgage against a residential property, where the ratio of the outstanding balance, less the amount of mortgage insurance, to the valuation of the security is no more than 80 per cent (where the exposure is 90 days or more worth of payments past-due, and the valuation is not older than 12