APRA, in a letter to all authorized deposit-taking institutions and insurers, provides guidance on managing capital during the period of significant disruption caused by COVID-19. In this letter, APRA lays down its expectations from authorized deposit-taking institutions, general insurers, life companies, and private health insurers to limit discretionary capital distributions in the months ahead, including deferrals or prudent reductions in dividends. In another letter to applicants for new licenses, APRA advised that it is temporarily suspending issuing new licenses for at least six months, in response to the economic uncertainty amid COVID-19 outbreak.
During at least the next couple of months, APRA expects that all authorized deposit-taking institutions and insurers will take a forward-looking view on the need to conserve capital and use capacity to support the economy and use stress testing to inform these views while giving due consideration to plausible downside scenarios. APRA also expects these entities to initiate prudent capital management actions, on a preemptive basis, to ensure that they maintain the confidence and capacity to continue to lend and support their customers. APRA expects that authorized deposit-taking institutions and insurers will seriously consider deferring decisions on the appropriate level of dividends until the outlook is clearer. However, where a Board is confident that they are able to approve a dividend before this, on the basis of robust stress testing results that have been discussed with APRA, this should nevertheless be at a materially reduced level. Dividend payments should be offset to the extent possible through the use of dividend reinvestment plans and other capital management initiatives. APRA also expects that Boards will appropriately limit executive cash bonuses and be mindful of the current challenging environment.
Keywords: Asia Pacific, Australia, Banking, Insurance, Superannuation, COVID-19, Dividend Distribution, Capital Buffer, Stress Testing, License Applications, Regulatory Capital, APRA
Previous ArticlePRA Publishes Business Plan for 2020-21
HM Treasury notified that, after considering all responses, the government intends to bring forward further legislation, when the Parliamentary time allows, to address issues identified in the consultation on supporting the wind-down of critical benchmarks.
EIOPA launched the 2021 stress test for the insurance sector in EU.
UK authorities jointly published the third edition of Regulatory Initiatives Grid setting out the planned regulatory initiatives for the next 24 months.
EC is requesting feedback on the proposed Commission Delegated Regulation on the content, methodology, and presentation of information that large financial and non-financial undertakings should disclose about their environmentally sustainable economic activities under the Taxonomy Regulation.
OSFI has set out the near-term priorities for federally regulated financial institutions and federally regulated private pension plans for the coming months until March 31, 2022.
Under the Italian G20 Presidency, BIS Innovation Hub and the Italian central bank BDI launched the second edition of the G20 TechSprint on the lookout for innovative solutions to resolve operational problems in green and sustainable finance.
ACPR published Version 1.0.0 of the RUBA taxonomy, which will come into force from the decree of January 31, 2022.
EBA proposed the regulatory technical standards on a central database on anti-money laundering and countering the financing of terrorism (AML/CFT) in EU.
ECB published its response to the targeted EC consultation on the review of the bank crisis management and deposit insurance framework in EU.
BCBS, CPMI, and IOSCO (the Committees) are inviting entities that participate in market infrastructures and securities markets through an intermediary as well as non-bank intermediaries to complete voluntary surveys on the use of margin calls.