Document ID: chunk:federal_register_of_legislation:F2022L01562:body:0:p44
Version: federal_register_of_legislation:F2022L01562
Segment Type: other
Provision Reference: 
Character Range: 114285–117118

the issuer; or
(ii)         the ADI meets the requirements relating to reductions in capital in APS 110.
8.             The instrument may provide for multiple call dates after five years. However, the specification of multiple call dates must not act to create an expectation that the instrument will be redeemed upon any call date.
9.             The instrument must confer no rights on holders to accelerate the repayment of future scheduled payments (coupon or principal) except in bankruptcy (including winding-up) and liquidation. Winding-up of the ADI must be irrevocable (that is, either by way of an effective resolution by shareholders or members for winding-up, or a court order has been made, and the time for appeal of the decision has passed). The making of an application for winding-up or the appointment of a receiver, administrator, or official with similar powers, including the exercise of APRA's powers under section 13A(1) of the Banking Act, must not be sufficient to accelerate repayment of the instrument.
10.         The instrument must not provide for payment to investors other than in the form of a cash payment.
11.         The instrument cannot have a credit sensitive distribution/payment feature (i.e. a distribution/payment that is reset based in whole or part on the credit standing of the issuer or the group or any other member of the group to which it belongs). The instrument may utilise a broad index as a reference rate for distribution or payments calculation purposes. Where an issuer is a reference entity in the determination of the reference rate, the reference rate must not exhibit any significant correlation with the issuer's credit standing. APRA may require an ADI to exclude an instrument from treatment as Tier 2 Capital where APRA considers that the reference rate is sensitive to the credit standing of the issuer.
12.         The instrument is directly issued by the issuer and, except where otherwise permitted in this Prudential Standard, the issuer, any other member of a group to which the issuer belongs, or any other related entity[46], cannot have purchased or directly or indirectly[47] funded the purchase of the instrument or be funding the purchase of the instrument.
13.         If the terms of the instrument provide the ability (even in contingent circumstances) to substitute the issuer of the Tier 2 Capital instruments or the issuer of the ordinary shares into which they may convert (i.e. to replace the ADI with another party), the relevant documentation must set out the mechanism to ensure that there will be a capital injection into the ADI to replace the transferred capital instrument. The replacement capital injection must occur at least simultaneously with the substitution and must be unconditional. The capital injection must be of equal or better