Banking (prudential standard) determination No. 4 of 2007 - Prudential Standard APS 111 - Capital Adequacy: Measurement of Capital
Intra-group capital transactionsIntra-group capital transactions
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Intra-group capital transactions
- The matters APRA may consider in assessing whether a component of capital, resulting from intra-group transactions, does not represent a genuine contribution to financial strength include, but are not limited to, whether a component of capital:
(a) is clearly supplied from debt raised by other group members;
(b) results from intra-group transactions with no economic substance;
(c) is contributed by a member of the group using funding sourced, directly or indirectly, from the ADI itself; or
(d) is contributed by a group member and the funding of which contains cross-default clauses that would be triggered as a result of the ADI failing to meet any servicing obligations.
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In assessing the overall capital strength of an ADI on a Level 2 basis, APRA will have regard to the ability of the ADI to readily extract capital from members of the consolidated banking group should the need arise to recapitalise the ADI or other members of the group. In the event that any significant capital support across the group is not readily available, APRA may require an ADI to adjust its Level 2 risk-based capital ratio to reflect the lack of availability of capital.
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An ADI must, in measuring Level 2 capital, exclude any instrument issued by a member of the Level 2 group, where that instrument is guaranteed by another member of the Level 2 group. This does not apply to guarantees of capital issued by Special Purpose Vehicles (SPVs) in accordance with Attachment C.