Document ID: chunk:federal_register_of_legislation:F2022L01562:body:0:p58
Version: federal_register_of_legislation:F2022L01562
Segment Type: other
Provision Reference: 
Character Range: 150585–153496

written off or converted into ordinary shares or mutual equity interests.
    [4] This includes, but is not limited to, the future sale or issuance of a capital instrument and the future conversion of an instrument or debt into ordinary shares or mutual equity interests.

    [5]   As an example, repackaging may occur where an instrument is not marketed in line with its prudential treatment, or if the transaction documentation suggests to investors that the instrument has attributes of a lower level of capital than claimed for prudential treatment.

    [6] This includes cumulative unrealised gains or losses on effective cash flow hedges as defined in Australian Accounting Standards.

    [7] Total credit-risk-weighted assets include any assets forming part of a securitisation scheme which do not meet the operational requirements for regulatory capital relief under Prudential Standard APS 120 Securitisation (APS 120) or where the securitisation scheme is synthetic or has been undertaken on a funding-only basis.

    [8] Refer to footnote 7.

    [9] In cases where other capital instruments have a permanent write-off feature, this criterion is still deemed to be met by ordinary shares.

    [10]   This does not preclude a parent entity of the ADI from holding the instrument where the instrument is directly issued by the ADI to the parent entity.

    [11] Indirect exposures represent exposures that will result in a loss to the ADI substantially equivalent to any loss in the direct holding. As an example, this would include lending to a borrower on a non-recourse basis secured against any capital instruments of the ADI or members of the group. It would exclude, for example, full recourse lending to a borrower to purchase a well-diversified and well-collateralised portfolio that may include the relevant exposures.

    [12] Refer to paragraphs 24 and 27 of APS 110.

    [13] Refer to footnote 12.

    [14] Refer to footnote 12.

    [15] For these purposes, capital instruments issued by general insurance and life insurance companies need only incorporate loss absorption at point of non-viability provisions (refer to Attachment H to this Prudential Standard), and need not incorporate loss absorption provisions (refer to Attachment F to this Prudential Standard).

    [16] At Level 1, this includes all financial institutions that are affiliates of the ADI at Level 1. An affiliate for these purposes is defined as a company that controls, or is controlled by, or is under common control with, the ADI. Control of a company is defined as: (i) ownership, control, or holding power to vote 20 per cent or more of a class of voting securities of the company; or (ii) consolidation of the company with the ADI for financial reporting purposes.

    [17]  Equity exposures includes direct, indirect and synthetic equity exposures, where indirect exposures represent exposures that