Banking (prudential standard) determination No. 6 of 2006 - Prudential Standard APS 120 - Funds Management and Securitisation
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Overview
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Funds management encompasses the provision of investment and related services for the management of investors’ funds. Securitisation involves the pooling of assets, or interests in assets, in a special purpose vehicle (SPV), which is funded by the issue of securities.
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ADIs can incur financial, credit, operational and legal risks arising from the obligations associated with their funds management and securitisation activities. Involvement in these activities can also yield moral risk - the possibility that an ADI will feel a moral obligation or a commercial need to support a funds management or securitisation scheme, or the investors involved in such schemes, beyond any explicit legal obligation to do so.[2]
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It is the responsibility of the Board and management of an ADI to put in place clear strategies and policies to govern an ADI’s involvement in funds management and securitisation activities. These should incorporate appropriate management systems to identify, measure and control risks, including liquidity risks and potential conflicts of interest, arising from the ADI’s involvement in these activities.