Document ID: chunk:federal_register_of_legislation:F2023L00684:body:0:p46
Version: federal_register_of_legislation:F2023L00684
Segment Type: other
Provision Reference: 
Character Range: 116545–119452

or Tier 2 Capital instrument prior to conversion into the mutual equity interest;
     3. distributions on the mutual equity interest are paid out of distributable items (including retained earnings) of the issuer, and there are no features that require the issuer to make payments in kind. The level of distributions must not be tied or linked to the credit standing of the issuer. Distributions on all mutual equity interests on issue cannot, in aggregate, exceed 50 per cent of the issuer's net profit after tax in the financial year to which the distributions relate.[50] All distributions on mutual equity interests must be treated as dividends for the purposes of GPS 110;
     4. distributions are paid only after all legal and contractual obligations have been met and payments on more senior capital instruments have been made;
     5. each mutual equity interest absorbs losses on a going concern basis proportionately, and pari passu, with all other mutual equity interests.
 2. Issue documentation and marketing material for mutual equity interests must clearly and prominently state that:
     1. the mutual equity interest is neither covered by the Financial Claims Scheme nor guaranteed by the Australian Government;
     2. the principal amount of the mutual equity interest is perpetual and never repaid outside liquidation (other than discretionary repurchases subject to APRA's approval);
     3. the holder of the mutual equity interest may only be entitled to a claim on the issuing regulated institution's residual assets after more senior claims (including Additional Tier 1 Capital and Tier 2 Capital instruments) have been paid;
     4. neither the issuer nor the holder of the mutual equity interest is allowed to exercise any contractual rights of set-off in relation to the mutual equity interest; and
     5. the regulated institution has full discretion over the timing and amount of any distributions paid on the mutual equity interest, including not paying a distribution.
 3. A regulated institution must obtain APRA's approval prior to issuing mutual equity interests, or Additional Tier 1 Capital or Tier 2 Capital instruments that convert to mutual equity interests in accordance with Attachment E to this Prudential Standard.
 4. The principal amounts of all mutual equity interests on issue (determined in accordance with paragraph 1(c)(ii) of this Attachment) are eligible for inclusion in Common Equity Tier 1 Capital up to a maximum limit of 25 per cent of the regulated institution's Common Equity Tier 1 Capital before applying regulatory adjustments under paragraph 31(g) of this Prudential Standard.
 5. The principal amounts of all mutual equity interests on issue (determined in accordance with paragraph 1(c)(ii) of this Attachment) are eligible for inclusion in Tier 1 Capital and the capital base.
 1. The net assets of the regulated institution referred to