Document ID: chunk:federal_register_of_legislation:F2016L01433:body:0:p3
Version: federal_register_of_legislation:F2016L01433
Segment Type: other
Provision Reference: 
Character Range: 5433–8412

for the Level 3 group;
(b)          ensure that adequate systems and controls are in place to identify, measure, manage, monitor and report on material ITEs in the Level 3 group in a timely manner and that those systems and controls are documented;
(c)          engage in oversight, which may be via a board committee, of the approach to the identification, measurement, management and monitoring of ITEs and compliance with the ITE policy, which includes receiving regular reviews of which ITEs are deemed to be material to the operations of the Level 3 group; and
(d)          review the ITE policy at least annually, to ensure that this policy remains adequate and appropriate for identifying, measuring, managing and monitoring material risks in relation to ITEs.
11.         If a prudentially regulated institution in the Level 3 group proposes to accept terms and conditions, in dealing with Level 3 institutions in the group, that are not consistent with terms and conditions that would be negotiated on an arms-length basis in such a dealing, those terms and conditions must first be approved by the Board of the Level 3 Head with justification fully and clearly documented.

The ITE policy
12.         The ITE policy for a Level 3 group must:
(a)          be conceptually sound, consistently implemented, transparent and be subject to independent review;
(b)          capture all material ITEs;
(c)          include limits on acceptable levels of ITEs for a Level 3 institution in the Level 3 group having regard to:
(i)            the Level 3 institution's Board-approved limits on exposures to unrelated institutions of broadly equivalent credit status; and
(ii)         the potential impact on the Level 3 group's capital and liquidity positions, as well as the institution's ability to continue operating, as a result of a failure of any other institution in the group; and
(d)          include a description of the procedures for identifying, reviewing, controlling and reporting material ITEs within the Level 3 group. This must include:
(i)            a clear statement of the respective responsibilities and compliance obligations on the Board of the Level 3 Head, its board committees and senior management of the Level 3 group in relation to the monitoring and management of material ITEs;
(ii)         escalation procedures for ITEs that facilitate responses to identified policy breaches between formal reporting cycles;
(iii)       the circumstances in which ITE limits may be exceeded and the authority required for approving such excesses;
(iv)        procedures for resolving any conflict of interest arising in relation to ITEs;
(v)          procedures for the 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