Assets held by custodiansAssets held by custodians

Assets held by custodians

13. Paragraph 14 applies where a custodian holds:

(a) the legal title to an asset or assets on bare trust; or

(b) an asset or assets under an agreement of a kind determined in writing by APRA for the purposes of this paragraph.

14. An amount representing an interest in, or in relation to, an asset held by a custodian is excluded from being an asset in Australia if:

(a) the custodian does not have a registered office (within the meaning of the Corporations Act) in Australia;

(b) the insurer cannot enforce its rights against the custodian in an Australian court;

(c) the assets of the insurer are not kept distinct and separate from the custodian’s own assets;

(d) the external custody agreement entered into between the insurer and the custodian is not subject to the laws of a state or territory of Australia;

(e) the external custody agreement does not provide for liability on the part of the custodian arising from the acts or omissions on the part of the custodian, its agents or sub-custodians;

(f) the external custody agreement does not describe the process by which the insurer provides authorised instructions to the custodian;

(g) the external custody agreement does not describe the process by which the custodian provides periodic reports to the insurer;

(h) the external custody agreement does not provide for flexibility as to the rights and obligations of the parties to enable them to ensure compliance in the event of any changes to APRA’s prudential requirements[7] or other relevant legislation;

(i) the asset held by the custodian would not be an asset in Australia if it were held directly by the insurer (either because it was excluded under some other part of this Prudential Standard or because it would not otherwise be an asset in Australia within the meaning of paragraph 28(a) of the Act);

(j) the asset held by the custodian is an interest in, or in relation to, an asset held by a sub-custodian, and the asset held by the sub-custodian would not be an asset in Australia if it were held directly by the insurer (either because it was excluded under some other part of this Prudential Standard or because it would not otherwise be an asset in Australia within the meaning of paragraph 28(a) of the Act); or

(k) the custodian has the right to suspend or delay the transfer or realisation of the asset held by the custodian pending sale of any asset outside Australia.

15. Where an insurer has in place external custody agreements that:

(a) pre-date this Prudential Standard; and