APRA Revises Prudential Standard on Capital Adequacy
The Australian Prudential Regulation Authority (APRA) published the final prudential standard APS 111, which sets out detailed criteria for measuring the regulatory capital of an authorized deposit-taking institution. APRA also outlined the steps taken in finalizing the revised APS 111, including an assessment of the regulatory impact. APS 111 sets out the characteristics that an instrument must have to qualify as "regulatory capital" for an authorized deposit-taking institution and the various regulatory adjustments to be made to determine the total regulatory capital. APRA also published its response to the submissions received to the May 2021 consultation on APS 111. The final revised APS 111 will come into effect from January 01, 2022.
APRA had proposed some new minor revisions to APS 111 in May 2021. These revisions clarified that Common Equity Tier 1 capital would not be permitted to have unusual features that could undermine its role as the highest quality loss-absorbing capital, in line with the approach for other capital instruments. Submissions from industry did not raise concerns regarding this proposal. However, some authorized deposit-taking institutions did request APRA to provide further clarity regarding "repackaging" arrangements and the applicability of the revised prudential standard to foreign bank branches. APRA has clarified that APS 111 does not apply to a foreign authorized deposit-taking institution. As part of APRA’s approach to licensing, APRA will typically review whether foreign institutions are subject to comparable capital requirements in their home country. The key revisions in this update of the Prudential Standard are designed to:
- reinforce financial system resilience, through changes to the capital treatment of an institution's equity investments in their banking and insurance subsidiaries
- promote simple and transparent capital issuance, through the removal of the allowance for the use of special purpose vehicles in regulatory capital issuance
- clarify aspects of APS 111, including provision of additional technical information to assist institutions in issuing capital instruments
Related Links
Effective Date: January 01, 2022
Keywords: Asia Pacific, Australia, Banking, APS 111, Capital Adequacy, Regulatory Capital, Basel, APRA
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Patrycja Oleksza
Applies proficiency and knowledge to regulatory capital and reporting analysis and coordinates business and product strategies in the banking technology area
Previous Article
MAS to Promote Access to Quality ESG DataRelated Articles
EBA Publishes Final Regulatory Standards on STS Securitizations
The European Banking Authority (EBA) published the final draft regulatory technical standards specifying and, where relevant, calibrating the minimum performance-related triggers for simple.
ECB Further Reviews Costs and Benefits Associated with IReF
The European Central Bank (ECB) is undertaking the integrated reporting framework (IReF) project to integrate statistical requirements for banks into a standardized reporting framework that would be applicable across the euro area and adopted by authorities in other EU member states.
EBA Publishes Funding Plans Report, Receives EMAS Certification
The European Banking Authority (EBA) has been awarded the top European Standard for its environmental performance under the European Eco-Management and Audit Scheme (EMAS).
MAS Launches SaaS Solution to Simplify Listed Entity ESG Disclosures
The Monetary Authority of Singapore (MAS) set out the Financial Services Industry Transformation Map 2025 and, in collaboration with the SGX Group, launched ESGenome.
BCBS to Finalize Crypto Rules by End-2022; US to Propose Basel 3 Rules
The Basel Committee on Banking Supervision met, shortly after a gathering of the Group of Central Bank Governors and Heads of Supervision (GHOS), the oversight body of BCBS.
IOSCO Welcomes Work on Sustainability-Related Corporate Reporting
The International Organization of Securities Commissions (IOSCO) welcomed the work of the international audit and assurance standard setters—the International Auditing and Assurance Standards Board (IAASB)
BoE Allows One-Day Delay in Statistical Data Submissions by Banks
The Bank of England (BoE) published a Statistical Notice (2022/18), which informs that due to the Bank Holiday granted for Her Majesty Queen Elizabeth II’s State Funeral on Monday September 19, 2022.
ACPR Amends Reporting Module Timelines Under EBA Framework 3.2
The French Prudential Control and Resolution Authority (ACPR) announced that the European Banking Authority (EBA) has updated its filing rules and the implementation dates for certain modules of the EBA reporting framework 3.2.
ECB Paper Discusses Disclosure of Climate Risks by Credit Agencies
The European Central Bank (ECB) published a paper that examines how credit rating agencies accepted by the Eurosystem, as part of the Eurosystem Credit Assessment Framework (ECAF)
APRA to Modernize Prudential Architecture, Reduces Liquidity Facility
The Australian Prudential Regulation Authority (APRA) announced reduction in the aggregate Committed Liquidity Facility (CLF) for authorized deposit-taking entities to ~USD 33 billion on September 01, 2022.
