Document ID: chunk:federal_register_of_legislation:F2022L01562:body:0:p41
Version: federal_register_of_legislation:F2022L01562
Segment Type: other
Provision Reference: 
Character Range: 106692–109423

1 of this Attachment, the instrument must be capable of conversion or write-off taking place at any time of day:
(a)          during a business day; or
(b)          on a day that is not a business day.
6.             To qualify as eligible Additional Tier 1 Capital at Level 2, an instrument issued by an ADI or a fully consolidated subsidiary of a Level 2 group must provide for conversion or write-off of the instrument upon the Level 2 group reaching the loss absorption trigger point.
7.             The amount of an Additional Tier 1 Capital instrument that may be recognised in the ADI's Tier 1 Capital and Total Capital is the minimum level of Common Equity Tier 1 Capital that would be generated by full conversion or write-off of the instrument on the occurrence of a loss absorption event. In determining, at any point in time, the level of Common Equity Tier 1 Capital that would be generated by conversion or write-off, the ADI must take into account any tax or other potential offsets which might impact the minimum level of Common Equity Tier 1 Capital that would be generated if conversion or write-off were to take place. Adjustments to the amount of an instrument included in Tier 1 Capital or Total Capital must be updated over time to reflect any changes in the best estimates of the offset value. Where an instrument's primary loss absorption mechanism is conversion into ordinary shares, an ADI is not required to take into account any tax effect resulting from write-off of the instrument in the event conversion was not achievable.
8.             The aggregate amount of full or partial[43] conversion or write-off of Additional Tier 1 Capital instruments must, as a minimum, be no less than the lower of:
(a)          the amount required to ensure the loss absorption event no longer applies (i.e. the amount required to restore fully the Common Equity Tier 1 Capital ratio under APS 110 of the ADI and Level 2 group to 5.125 per cent);
(b)          the principal amount of all the instruments.
9.             If a loss absorption event no longer applies, unless otherwise required by APRA, no further conversion or write-off of Additional Tier 1 Capital instruments need be undertaken.
10.         Where an Additional Tier 1 Capital instrument provides for conversion into ordinary shares (or mutual equity interests), the ADI must ensure that, at the time of issue and on a continuing basis, there are no legal or other impediments to issuing the relevant number of shares (or mutual equity interests) and all necessary authorisations have been obtained to effect conversion.
11.         An Additional Tier 1 Capital instrument must unequivocally provide for the amount of the instrument to be immediately