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Guidance Note AGN 110.2

Non-Consolidated Subsidiaries

1. For the purposes of determining an authorised deposit-taking institution's (ADI’s) capital adequacy at the consolidated banking group level (i.e. Level 2), all banking and other financial activities (both regulated and unregulated) conducted within the banking group must be consolidated.
2. Consolidation at Level 2 should cover the global operations of an ADI and its subsidiary entities, as well as any other controlled banking entities, securities entities and other financial entities (e.g. finance companies, money market corporations, stockbrokers and leasing companies), except for entities involved in the following business activities:

(a) insurance businesses (including friendly societies and health funds);

(b) acting as manager, responsible entity, approved trustee, trustee or similar role in relation to funds management or the securitisation of assets; and

(c) non-financial (commercial) operations

or special purpose vehicles to which assets have been transferred in accordance with APRA's clean sale requirements as set out in Guidance Note AGN 120.3 Purchase and Supply of Assets.

3. Group entities excluded from Level 2 consolidation are to be deducted from an ADI’s Level 2 capital in accordance with Prudential Standard APS 111 Capital Adequacy: Measurement of Capital and Guidance Note AGN 111.4 Capital Deductions.