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
These entities are fully consolidated within the Group and there are no restrictions on or impediments to transferring of funds or capital within the Group.
The entities within the Group are fully capitalised in accordance with APRA requirements and Community CPS Board Policy.
Capital Instruments – Group capital is exclusively internally generated and comprises retained earnings and reserves. There is no external capital support.
Community CPS’ capital comprises:
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:
Incorporates other risks not covered in Pillar 1 which are applicable to the business.
The Board has a target regulatory capital adequacy range of 13-16%.
As Community CPS is involved in the business of lending, Credit Risk is a risk which gains a high degree of focus.
Credit Risk is associated with the quality of lending, other monetary assets and derivatives and in particular the assessment of the credit worthiness of counterparties. Accordingly, the level of total arrears is used as an indicator of the inherent credit risk in the loan book. In addition to arrears, there is an element of credit risk for loans that are not in arrears. This component is also considered when quantifying credit risk.
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.