Providing Certainty for Contractual Loss Absorption Provisions in Regulatory Capital

This consultation process has now been completed.
Consultation Type
Discussion Paper

Key Documents

The purpose of this paper is to assist in the preparation of advice to Government on the need for legislative amendments to facilitate the effective operation of new prudential requirements on the loss absorbency of regulatory capital. These requirements have been adopted in order to strengthen Australia’s financial system by ensuring capital instruments can absorb losses when institutions are in financial distress as opposed to relying on public sector funds.

The amendments discussed in this consultation paper are intended to ensure that contractual loss absorption provisions contained in Additional Tier 1 and Tier 2 capital instruments issued by ADIs, general insurers (GIs) and life insurers (LIs) operate as intended and are not rendered ineffective by provisions in the Corporations Act 2001 that may restrict the ability of companies to issue, vary, convert or cancel shares. This will ensure that these instruments can fulfil their role as regulatory capital by absorbing losses in line with their contractual terms.


No submissions are currently available.