56Maintenance of adequate capital and reserves

#### 56 Maintenance of adequate capital and reserves (1) The Board is required to ensure, according to sound commercial principles, that the capital and reserves of EFIC at any time are sufficient: (a) to meet the likely liabilities of EFIC, having regard to the estimated contingent liability at that time of EFIC under Part 4; and (b) to make adequate provision for default in the repayment of principal, or in the payment of interest or other charges, in connection with loans made by EFIC; and (c) to make adequate provision for losses in relation to loans made in the form of equity investments made by EFIC. (2) For the purposes of subsection (1): (a) the value of the capital and reserves of EFIC is to be assessed on the assumption that the whole of the amount specified in subsection 54(8) had been paid to EFIC under section 54; and (b) a likely liability of EFIC in relation to anything done by EFIC, or a likely default of a kind referred to in paragraph (1)(b) in relation to a loan made by EFIC, or a likely loss of a kind referred to in paragraph (1)(c) to a loan made by EFIC in the form of an equity investment, in accordance with an approval or direction under Part 5 is to be ignored to the extent that the Commonwealth would be liable to pay an amount to EFIC under section 65 or 66 in relation to the same matter; and (c) a likely liability of EFIC in relation to a DIFF loan, as defined in section 66A, or a likely default of a kind referred to in paragraph (1)(b) in relation to such a loan, is to be ignored to the extent that the Commonwealth would be liable to pay an amount to EFIC under section 66A in relation to the same matter. (3) In this section, a reference to the estimated contingent liability of EFIC under Part 4 at any time is a reference to the amount that EFIC estimates to be, at that time, the total contingent liability of EFIC under all contracts of insurance or indemnity entered into, and all guarantees given, by EFIC under Part 4. (4) If, at any time, the Board determines: (a) that the capital and reserves of EFIC are not sufficient to meet the likely liabilities, and make the provision, referred to in subsection (1); or (b) that there are reasonable grounds for believing that, at a time in the future, the capital and reserves of EFIC may not be sufficient to meet the likely liabilities, and make the provision, referred to in subsection (1); the Board must, as soon as practicable, cause the responsible Ministers to be informed in writing of its determination and the reasons for that determination.