{"id":"F2016L01433","name":"Banking, Insurance and Life Insurance (prudential standard) determination No. 3 of 2016","slug":"banking-insurance-and-life-insurance-prudential-standard-determination-no-3-of-2016","collection":"legislative_instrument","jurisdiction":"commonwealth","status":"in_force","isInForce":true,"actNumber":null,"makingDate":null,"administeringDepartment":null,"currentVersion":{"id":95051,"registerId":"commonwealth-F2016L01433-current","compilationNumber":null,"startDate":"2026-04-02","status":"InForce","reasons":null,"registeredAt":null},"sections":[{"sectionNumber":"Authority","sectionType":"part","heading":"Authority","content":"# Authority\n\n1.  This Prudential Standard is made under:\n\n(a) section 11AF of the Banking Act 1959 (Banking Act);\n\n(b) section 32 of the Insurance Act 1973 (Insurance Act); and\n\n(c) section 230A of the Life Insurance Act 1995 (Life Insurance Act).","sortOrder":0},{"sectionNumber":"Application","sectionType":"part","heading":"Application","content":"# Application\n\n2. This Prudential Standard applies to each Level 3 Head.\n\n3. This Prudential Standard commences on 1 July 2017.","sortOrder":1},{"sectionNumber":"Interpretation","sectionType":"part","heading":"Interpretation","content":"# Interpretation\n\n4. Terms that are defined in Prudential Standard 3PS 001 Definitions appear in bold the first time they are used in this Prudential Standard.\n\n5. Where this Prudential Standard provides for APRA to exercise a power or discretion, this power or discretion is to be exercised in writing.","sortOrder":2},{"sectionNumber":"Intra-group transactions and exposures","sectionType":"part","heading":"Intra-group transactions and exposures","content":"# Intra-group transactions and exposures\n\n6. For the purposes of this Prudential Standard, an intra-group transaction and exposure (ITE) is the total exposure, including on- and off-balance sheet exposures, of a Level 3 institution to another Level 3 institution within the same Level 3 group.\n\n7. A Level 3 Head must have an ‘ITE policy’ that addresses all material risks arising in relation to ITEs associated with operations undertaken by Level 3 institutions in the Level 3 group. The policy must include systems and procedures to identify, measure, monitor, evaluate, report and control or mitigate all material risks arising from ITEs between Level 3 institutions in the group.\n\n8. A Level 3 Head must conduct forward-looking scenario analysis and stress testing of the Level 3 group’s material ITEs. The analysis must assess the impact of changes in market conditions and key risk factors on these ITEs, and how these changes impact the group’s risk profile, capital strength and earnings.\n\n9. The management of ITEs must be a part of a Level 3 group’s risk management framework.[\\[1\\]](#_ftn1)","sortOrder":3},{"sectionNumber":"The role of the Board of a Level 3 Head","sectionType":"part","heading":"The role of the Board of a Level 3 Head","content":"# The role of the Board of a Level 3 Head\n\n10. The Board of a Level 3 Head must:\n\n(a) approve the ITE policy for the Level 3 group;\n\n(b) ensure that adequate systems and controls are in place to identify, measure, manage, monitor and report on material ITEs in the Level 3 group in a timely manner and that those systems and controls are documented;\n\n(c) engage in oversight, which may be via a board committee, of the approach to the identification, measurement, management and monitoring of ITEs and compliance with the ITE policy, which includes receiving regular reviews of which ITEs are deemed to be material to the operations of the Level 3 group; and\n\n(d) review the ITE policy at least annually, to ensure that this policy remains adequate and appropriate for identifying, measuring, managing and monitoring material risks in relation to ITEs.\n\n11. If a prudentially regulated institution in the Level 3 group proposes to accept terms and conditions, in dealing with Level 3 institutions in the group, that are not consistent with terms and conditions that would be negotiated on an arms-length basis in such a dealing, those terms and conditions must first be approved by the Board of the Level 3 Head with justification fully and clearly documented.","sortOrder":4},{"sectionNumber":"The ITE policy","sectionType":"part","heading":"The ITE policy","content":"# The ITE policy\n\n12. The ITE policy for a Level 3 group must:\n\n(a) be conceptually sound, consistently implemented, transparent and be subject to independent review;\n\n(b) capture all material ITEs;\n\n(c) include limits on acceptable levels of ITEs for a Level 3 institution in the Level 3 group having regard to:\n\n(i) the Level 3 institution’s Board-approved limits on exposures to unrelated institutions of broadly equivalent credit status; and\n\n(ii) the potential impact on the Level 3 group’s capital and liquidity positions, as well as the institution’s ability to continue operating, as a result of a failure of any other institution in the group; and\n\n(d) include a description of the procedures for identifying, reviewing, controlling and reporting material ITEs within the Level 3 group. This must include:\n\n(i) a clear statement of the respective responsibilities and compliance obligations on the Board of the Level 3 Head, its board committees and senior management of the Level 3 group in relation to the monitoring and management of material ITEs;\n\n(ii) escalation procedures for ITEs that facilitate responses to identified policy breaches between formal reporting cycles;\n\n(iii) the circumstances in which ITE limits may be exceeded and the authority required for approving such excesses;\n\n(iv) procedures for resolving any conflict of interest arising in relation to ITEs;\n\n(v) procedures for the participation of prudentially regulated institutions in Level 3 group-wide operations;\n\n(vi) processes to ensure the transparency of dealings with entities external to the Level 3 group that are associated with ITEs;\n\n(vii) thresholds and procedures for reporting material changes to the Board of the Level 3 Head, in both formal reporting cycles and outside formal reporting cycles; and\n\n(viii) a timetable for a regular review of the reports by the Board of the Level 3 Head.","sortOrder":5},{"sectionNumber":"Participation in group-wide operations","sectionType":"part","heading":"Participation in group-wide operations","content":"# Participation in group-wide operations\n\n13. A Level 3 Head must establish policies and procedures to address risks posed to the group from the participation of any prudentially regulated institution in Level 3 group-wide operations including, but not limited to, sharing premises with other Level 3 institutions, centralising back-office functions or outsourcing services to other Level 3 institutions.\n\n14. Where a prudentially regulated institution participates in Level 3 group-wide activities, a Level 3 Head must:\n\n(a) consider the risks posed to that institution on a standalone basis as a result of its participation in such activities;\n\n(b) be satisfied that these ITEs are appropriately addressed by the Level 3 group’s risk management policies;\n\n(c) ensure dealings with other parties arising from participation in group-wide operations are appropriately documented in written service agreements[\\[2\\]](#_ftn2);\n\n(d) facilitate APRA being able to obtain information required for the supervision of either individual prudentially regulated institutions or the Level 3 group as a whole; and\n\n(e) ensure that there is a clear obligation under the written arrangements for any service provider to comply with any direction given by APRA in relation to the operations of any prudentially regulated institution within the Level 3 group.","sortOrder":6},{"sectionNumber":"Internal reporting systems","sectionType":"part","heading":"Internal reporting systems","content":"# Internal reporting systems\n\n15. A Level 3 Head’s management information systems must incorporate reporting systems in relation to ITEs across the Level 3 group.[\\[3\\]](#_ftn3)\n\n16. Reports on material ITEs must be provided to APRA on request.","sortOrder":7},{"sectionNumber":"Limits and approvals","sectionType":"part","heading":"Limits and approvals","content":"# Limits and approvals\n\n17. Where, in APRA’s view, the Level 3 group is exposed to a significant level of ITEs, APRA may require a Level 3 Head to limit or reduce the Level 3 group’s level of ITEs. APRA may also determine how a Level 3 Head must calculate the ITEs. In determining any requirement to limit or reduce the Level 3 group’s level of ITEs, or how a Level 3 Head must calculate an ITE, APRA may take account of the following factors:\n\n(a) whether the Level 3 group has been acting in a manner that is consistent with the ITE policy;\n\n(b) the characteristics of ITEs, including their number, size and nature;\n\n(c) the characteristics of the Level 3 group, including the nature of its business and the experience of its management; and\n\n(d) other relevant factors to be considered on a case-by-case basis.","sortOrder":8},{"sectionNumber":"Notification requirements","sectionType":"part","heading":"Notification requirements","content":"# Notification requirements\n\n18. A Level 3 Head must notify APRA as soon as practicable, and no more than 10 business days, after it becomes aware:\n\n(a) of a breach of the limits in the ITE policy;\n\n(b) of any significant breach of, or material deviation from, the ITE policy; or\n\n(c) that the ITE policy did not adequately address a material risk,\n\nand advise of remedial actions taken, or planned to be taken, to deal with the issue.\n\n19. A Level 3 Head must submit to APRA a copy of its ITE policy as soon as practicable, and no more than 10 business days, after Board approval.","sortOrder":9},{"sectionNumber":"Adjustments and exclusions","sectionType":"part","heading":"Adjustments and exclusions","content":"# Adjustments and exclusions\n\n20. APRA may adjust or exclude a specific requirement in this Prudential Standard in relation to the Level 3 Head.[\\[4\\]](#_ftn4)","sortOrder":10}],"analysis":{"flash_summary":{"complexity_score":5,"scope_assessment":{"changed":false,"description":"The instrument itself defines its scope to apply to Level 3 Heads (s2) and defines ITE as exposures between Level 3 institutions in the same group (s6). It does not, on its face, expand or narrow that statutory scope beyond those definitions or amend other instruments."},"complexity_factors":["Breadth of the exposure concept: ITE includes both on‑ and off‑balance sheet exposures across Level 3 institutions (s6).","Governance demands: Board must approve policy, oversee implementation, review annually and approve any non‑arm’s‑length terms (s10, s11).","Detailed policy content: Policy must be conceptually sound, capture all material ITEs, set limits tied to unrelated counterparties and capital/liquidity effects, and be independently reviewable (s12(a)–(c)).","Forward‑looking requirements: Mandatory scenario analysis and stress testing of material ITEs, assessing impacts on risk profile, capital and earnings (s8).","APRA discretion and intervention: APRA may require limits, dictate calculation methods, and consider conduct and group characteristics when doing so (s17).","Notification and timing obligations: Breaches, material deviations or inadequacies must be notified to APRA as soon as practicable and within 10 business days; policy must be lodged within 10 business days of Board approval (s18–19).","Group‑wide operations obligations: Written service agreements, standalone risk consideration for participating institutions, and obligations to allow APRA information and directions (s13).","Reporting systems and supervisory access: Management information systems must report on ITEs and APRA may request reports on material ITEs (s15–16).","Regulatory flexibility: APRA may adjust or exclude specific requirements for a Level 3 Head (s20).","Operational implementation: Requires escalation procedures, authority matrices for limit breaches, conflict‑of‑interest procedures and timetabled Board reporting (s12(d)(ii)–(viii))."],"plain_english_summary":"This Prudential Standard requires each Level 3 Head to identify, measure, monitor and control intra‑group transactions and exposures (ITE) across the consolidated group. It mandates an ITE policy, board approval and oversight, forward‑looking stress testing, internal reporting, written service agreements for group operations, and prompt notifications to APRA. Compliance costs fall on Level 3 Heads and their regulated entities; boards must decide and document policy, while APRA can impose limits, require calculations, request reports, or adjust/exclude requirements."},"flash_summary_failed":{"failed":true,"reason":"Unauthenticated. Configure AI_GATEWAY_API_KEY or use a provider module. Learn more: https://ai-sdk.dev/unauthenticated-ai-gateway","source":"analysis-cron"},"kimi_summary":{"content_quality":"ok","complexity_score":4,"scope_assessment":{"changed":false,"description":"The legislation appears focused on its original purpose of regulating intra-group transactions within financial conglomerates. No evidence of scope creep beyond prudential supervision of Level 3 groups."},"complexity_factors":["Heavy reliance on externally defined terms from Prudential Standard CPS 001 (undefined within this document)","Nested conditional requirements (e.g., clause 12(c)(i)-(ii) with multiple sub-layers)","Cross-references to three separate Acts (Banking Act 1959, Insurance Act 1973, Life Insurance Act 1995)","Discretionary powers granted to APRA with case-by-case factors (clause 17)","Multiple overlapping obligations (policy requirements, board duties, reporting systems, notification requirements)","Conceptual density: requires understanding of 'Level 3 group' structure, which is not explained in this instrument"],"plain_english_summary":"This Prudential Standard requires large financial group parents to identify, monitor and control material intra‑group financial dealings so risks and liquidity flows between sister companies are transparent and constrained. It applies to ultimate parent companies of APRA‑regulated banking, insurance and life insurance groups. \n\nWhy it matters: it forces board oversight, regular testing and regulator visibility to prevent problems in one part of a group dragging down regulated entities."}},"importantCases":[],"_links":{"self":"/api/acts/banking-insurance-and-life-insurance-prudential-standard-determination-no-3-of-2016","history":"/api/acts/banking-insurance-and-life-insurance-prudential-standard-determination-no-3-of-2016/history","analysis":"/api/acts/banking-insurance-and-life-insurance-prudential-standard-determination-no-3-of-2016/analysis","conflicts":"/api/acts/banking-insurance-and-life-insurance-prudential-standard-determination-no-3-of-2016/conflicts","importantCases":"/api/acts/banking-insurance-and-life-insurance-prudential-standard-determination-no-3-of-2016/important-cases","documents":"/api/acts/banking-insurance-and-life-insurance-prudential-standard-determination-no-3-of-2016/documents"}}