Document ID: chunk:federal_register_of_legislation:F2022L01577:body:0:p8
Version: federal_register_of_legislation:F2022L01577
Segment Type: other
Provision Reference: 
Character Range: 19579–22532

the concentration risks involved with exceeding the large exposure limits and why the proposed exposures will not unreasonably expose the ADI to excessive risk; and
(b)          how the proposed exposures are consistent with its large exposures and risk concentration policies.

Notification requirements
37.         An ADI must notify APRA immediately of any breach of the large exposure limits under paragraph 30 of this Prudential Standard or any specific limits determined by APRA under paragraph 31 of this Prudential Standard (other than those where APRA has provided an approval under paragraph 36 of this Prudential Standard), including how the breach arose and remedial actions taken or planned to be taken to deal with the breach.
38.         An ADI must notify APRA immediately where it has concerns that its large exposures or risk concentrations have the potential to have a material impact on its capital adequacy and provide details of the proposed measures to address these concerns.

Significant risk concentrations
39.         Where an ADI has a number of large exposures or where APRA is of the view that the ADI is exposed to a significant level of risk concentration, APRA may:
(a)          require the ADI to maintain higher Prudential Capital Requirements (PCRs) at Level 1 or Level 2 or both. In considering whether an ADI's PCRs should be increased, APRA will take into account:
(i)            the consistency of the ADI's exposures with the ADI's large exposures and risk concentrations policies;
(ii)         the number of exposures, their individual size and nature; and
(iii)       the characteristics of the ADI, including the nature of its business and the experience of its management;
(b)          impose higher risk-weights in relation to those exposures; or
(c)          require an ADI to take measures to reduce its level of risk concentration.

Adjustments and exclusions
40.         APRA may adjust or exclude a specific prudential requirement in this Prudential Standard in relation to one or more specified ADIs or authorised NOHCs.[7]

Previous exercise of discretion
41.         An ADI must contact APRA if it seeks to place reliance, for the purposes of complying with this Prudential Standard, on a previous exemption or other exercise of discretion by APRA under a previous version of this Prudential Standard.

Attachment A—Measuring large exposure values
     1. The exposure value to be used in measuring large exposures is:
(a)          for banking book on-balance sheet non-derivative assets, the accounting value of the exposure that is net of specific provisions and value adjustments. An ADI may only use exposure values gross of specific provisions and value adjustments with prior agreement from APRA;
(b)          for instruments that give rise to CCR held in the banking book and trading book (excluding securities financing transactions (SFTs)),[8] the exposure at default as measured under APS