3AApproved loss absorbing subordinated debt

3A Approved loss absorbing subordinated debt

(1) An instrument or agreement of issue of approved loss absorbing subordinated debt must be approved by the Council prior to the time of issue. (2) The Council must consider the requirements in subclause (3) and have regard to the quantum of the proposed issue and the timing for draw down, in making its decision on approval. (3) Approved loss absorbing subordinated debt must be created by a debt instrument or agreement which meets and continues to meet the following terms and conditions: (a) it must comprise a mechanism which specifies the conditions and process for loss absorption, through diminution of value, conversion or other means, of the instrument or agreement on a going concern basis, such that prior to non‑compliance with the capital adequacy standard the value of the debt would be reduced to the relevant extent, and if necessary exhausted; and (b) it must have a minimum term of 10 years from the commencement of the loan; and (c) there must be no circumstances where repayment may be accelerated or called at the lender’s or any third party’s option; and (d) interest payments must not be payable where the payment of these would cause the fund to breach the capital adequacy standard; and (e) interest payment obligations may be capitalised and interest may be charged on capitalised interest; and (f) capital repayments must not be made where repayment would cause the fund to breach the capital adequacy standard; and (g) delayed capital repayments may be subject to continuing interest charges, on the interest charge and repayment conditions specified in this paragraph.