Document ID: chunk:federal_register_of_legislation:F2022L01620:front:0:p9
Version: federal_register_of_legislation:F2022L01620
Segment Type: other
Provision Reference: 
Character Range: 22651–25644

ratio

    59.         A locally incorporated ADI classified as an LCR ADI must meet the NSFR requirements in this Prudential Standard.

    60.         A locally incorporated LCR ADI must maintain an NSFR of at least 100 per cent at all times.

    61.         APRA may require an LCR ADI to maintain a higher minimum NSFR where APRA considers it appropriate to do so, including if it has concerns about the ADI's funding or liquidity risk profile or the quality of its liquidity risk management.

Stress testing

    62.         In addition to the requirements contained in paragraphs 52 to 56 of this Prudential Standard, an LCR ADI must conduct stress tests on a regular basis for a variety of short-term and protracted institution-specific and market-wide stress scenarios (individually and in combination) to identify sources of potential liquidity strain and to ensure that current exposures remain in accordance with the ADI's liquidity risk tolerance.

    63.         The stress test outcomes must be used to adjust the ADI's liquidity management strategy, policies and positions and to develop effective contingency plans to deal with events of liquidity stress.

    64.         Stress tests must enable the ADI to analyse the impact of stress scenarios on its Level 1 and Level 2 liquidity positions, as well as on the liquidity positions of individual business lines.

    65.         An LCR ADI's stress test scenarios and related assumptions must be well documented and reviewed together with the stress test results. Stress test results and vulnerabilities and any resulting actions must be reported to, and discussed with, the Board and APRA. Results of the stress tests must be integrated into the ADI's strategic planning process and its day-to-day risk management practices. The results of the stress tests must be explicitly considered in the setting of internal limits.

    66.         An LCR ADI must decide how to incorporate the results of stress tests in assessing and planning for related potential funding shortfalls in its contingency funding plan.

Local operational capacity

    67.         A foreign ADI must perform an assessment of its local operational capacity (LOC) to liquidate assets and make or receive payments without assistance from staff located outside Australia, at least annually, and provide the results of the assessment to APRA upon request.

    68.         A foreign ADI, in performing a LOC assessment, must ensure at a minimum, it considers a scenario involving a combination of time zones, different public holidays and an offshore operational risk event under which the foreign ADI would operate, including making and receiving payments, for a minimum of three business days without assistance from staff located outside Australia. For this purpose, the foreign ADI may assume that related-party operations within Australia continue to function normally.

    69.         APRA may impose additional requirements on a foreign