Public Disclosures

Community CPS Australia Ltd – Public Disclosure of Prudential Information (APS 330)

Community CPS Australia Group Structure

The Community CPS Australia Group provides financial services to its members. The entities comprising, and the construct of, the Group are shown here: Community CPS Australia Group Structure

Capital Structure – Community CPS Australia Ltd

Capital Instruments – Group capital is exclusively internally generated and comprises retained earnings and reserves. There is no external capital support.

Community CPS’ capital comprises:

• Current Public Disclosures of Prudential Information
• Previous Public Disclosures of Prudential Information

Capital Adequacy 

Community CPS takes a risk-based approach to the measurement of capital adequacy. Community CPS assesses risks for capital adequacy purposes with regard to the two Pillars APRA has established in the Basel II Framework, as set out below:

Pillar 1

• Credit Risk – arising from lending and treasury activities
• Market Risk – arising from mismatches in interest rate terms
• Operational Risk – ‘the risk of direct or indirect loss resulting from inadequate or failed internal processes, people and systems or from external events'

Pillar 2

Incorporates other risks not covered in Pillar 1 which are applicable to the business.

These risks are quantified and a level of capital is then assigned to that risk.  The quantification of each risk is reviewed at least annually or with any material change in the nature of Community CPS' business activities, permitting the level of capital assigned to each risk to also be adjusted.  This gives the Directors comfort that the level of capital held is appropriate for the current assessment of Community CPS' risks.

The Board has a target regulatory capital adequacy range of 13-16%.

Risk Exposure and Assessment

Community CPS raises doubtful debt provisions against expected credit risk losses (i.e. where a "loss event" has occurred).  Capital is held for unexpected credit risk losses.  The additional capital held for unexpected secured credit risk losses is determined using hypothetical scenario modelling allowing for abnormally high (10% - shock) levels of loan defaults, a large (30%) negative movement in security valuations and no recovery from mortgage insurance.  For unsecured loans, modelling is undertaken that allows for a significant (200%) deterioration in delinquency, an abnormally high (triple - shock) level of defaults and a large (30%) increase in losses on defaulting loans.