Document ID: chunk:federal_register_of_legislation:F2024L01518:body:0:p10
Version: federal_register_of_legislation:F2024L01518
Segment Type: other
Provision Reference: 
Character Range: 25724–28632

in accordance with Prudential Standard APS 113 Capital Adequacy: Internal Ratings-based Approach to Credit Risk (APS 113);
                 3.        RWA determined in accordance with APS 120;
                 4.         risk-weighted credit exposures calculated under APS 180;[10] and
                 5.           12.5 times the sum of the capital charges determined under APS 115, APS 116, APS 180 and Prudential Standard APS 117 Capital Adequacy: Interest Rate Risk in the Banking Book (APS 117);[11] or
         2.           72.5 per cent of total RWA calculated in accordance with paragraph 3 of this Attachment.[12]
 3.              For the purpose of paragraph 4(b) of this Attachment, an IRB ADI may determine its market risk capital charge using its internal model approach, rather than the standard method set out in APS 116.

Attachment B – Constraints on capital distributions
 1.              Capital distribution constraints apply when an ADI's Common Equity Tier 1 Capital ratio is within the capital buffer (CB) range (consisting of the capital conservation buffer plus any countercyclical capital buffer). The CB range is divided into four quartiles for the purposes of determining the minimum capital conservation ratios, as set out in Table 1.
Table 1: Minimum capital conservation ratios
Common Equity Tier 1 Capital ratio       Minimum capital conservation ratios (expressed as a percentage of earnings)

Within first quartile of buffer
PCR  to  ≤  (PCR + 0.25CB)               100
Within second quartile of buffer
> (PCR + 0.25CB)  to  ≤  (PCR + 0.50CB)  80
Within third quartile of buffer
> (PCR + 0.50CB)  to  ≤  (PCR + 0.75CB)  60
Within fourth quartile of buffer
> (PCR + 0.75CB)  to  ≤  (PCR + CB)      40
Above top of buffer
> (PCR + CB)                             0

 1.              The minimum capital conservation ratios in Table 1 represent the percentage of earnings that an ADI must not distribute if its Common Equity Tier 1 Capital ratio falls within the corresponding quartile. If the Common Equity Tier 1 Capital ratio falls within the first quartile, the ADI must also cease all Tier 1 Capital distributions.
 2.              Earnings are defined for the purposes of this Attachment as distributable profits calculated prior to the deduction of elements subject to the restriction on distributions. Earnings are calculated after the tax that would have been reported had none of the distributable items been paid. As such, any tax impact of making such distributions is reversed out. An ADI that does not have positive earnings and has a Common Equity Tier 1 Capital ratio less than the sum of its Common Equity Tier 1 PCR plus the capital conservation buffer must not make positive net distributions.
 3.              Payments made by an ADI that do not result in a depletion of Common Equity Tier 1 Capital are not considered to be distributions for the purposes