CTHRepealedLegislation
Banking Act 1959 - Making of Prudential Standards: APS 110 - Capital Adequacy; APS 111 - Capital Adequacy: Measurement of Capital; APS 221 - Large Exposures; APS 222 - Associations with Related Entities (25/11/2002)
AGN 111.4 - Capital DeductionsAGN 111.4 - Capital Deductions
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Turn the raw legal text into a practical explanation grounded in Banking Act 1959 - Making of Prudential Standards: APS 110 - Capital Adequacy; APS 111 - Capital Adequacy: Measurement of Capital; APS 221 - Large Exposures; APS 222 - Associations with Related Entities (25/11/2002).
AGN 111.4 - Capital Deductions
- The amount of future income tax benefits (other than those associated with general provisions for doubtful debts) to be deducted from an ADI’s Tier 1 capital at Level 1 and Level 2 should be net of any provision for deferred income tax liabilities. Where the provision for deferred income tax liabilities exceeds the amount of future income tax benefits, the excess cannot be added to Tier 1 capital (i.e. the net deduction is zero).
- For the purposes of paragraphs 8 and 9 of the Standard, the amount of equity investments to be deducted from capital is the book value of the investment, including any amount by which the investment has been revalued. Any intangible component of the investment (calculated as the excess of the purchase price over the net tangible assets acquired) must be deducted from Tier 1 capital.
- Where any investments in non-consolidated subsidiaries (as listed in AGN 110.2 – Non-consolidated Subsidiaries) have been incorporated for accounting purposes into the ADI’s consolidated group accounts, the consolidation of these entities should be reversed prior to the calculation of the risk-based capital ratio at Level 2. That is, any retained earnings, other reserves or minority interests of these entities included in the consolidated group’s Tier 1 capital as a result of the accounting consolidation should be removed from the group’s Tier 1 capital for capital adequacy purposes. Goodwill and any other intangible component of the investments must be deducted from the ADI’s Tier 1 capital at Level 2.
- An ADI may, as a result of membership of a dealer panel, trading or other activities agreed with APRA, undertake limited purchases of its own Tier 1 and/or Tier 2 capital instruments (see AGN 110.6 – Reductions in Capital). Such purchases are subject to a limit agreed with APRA, with the amount equal to the limit (or alternatively any actual holdings plus unused limit) deducted from the ADI’s Tier 1, Upper or Lower Tier 2 capital as appropriate, both at Level 1 and Level 2.