Assets held by custodiansAssets held by custodians

Assets held by custodians

18. Paragraph 19 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.

19. An asset held by a custodian for a locally incorporated insurer is excluded from being an asset in Australia if:

(a) the custodian does not reside in Australia or the custodian’s obligation to make payments or transfer assets to the locally incorporated insurer may be performed outside Australia;

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

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

(d) the external custody agreement entered into between the locally incorporated 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; or

(f) the external custody agreement does not describe the process by which the locally incorporated 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 locally incorporated 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 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 locally incorporated insurer (either because it would be excluded under another provision 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 sub-custodian does not reside in Australia or the sub-custodian’s obligation to make payments or transfer assets to the locally incorporated insurer may be performed outside Australia;

(k) 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 locally incorporated insurer (either because it would be excluded under another provision 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