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    APRA Finalizes Temporary Regulatory Treatment for COVID-Impacted Loans

    August 25, 2021

    The Australian Prudential Regulation Authority (APRA) published final version of the prudential standard on credit quality (APS 220) and response to the proposed regulatory support for authorized deposit-taking institutions offering temporary financial assistance to borrowers impacted by the pandemic. As a response to the consultation, APRA received feedback on adjustments to APS 220 and on the related reporting requirements. The responses largely focused on the time period for the regulatory support and other more minor clarifications. Thus, APRA is extending, from July 08, 2021 until September 30, 2021, the time period for the temporary adjustments to APS 220 to apply to loans that were granted repayment deferrals.

    The one-week consultation had been launched on July 30, 2021. Under the proposed approach, for eligible borrowers, authorized deposit-taking institutions will not need to treat a repayment deferral as a loan restructuring or the period of deferral as a period of arrears, whether or not the borrower has previously been granted a repayment deferral. The consultation covered proposal to give effect to the temporary prudential treatment by way of adjustments to APS 220, largely mirroring the approach in March 2020. The consultation also covered proposal to collect entity-level data on these loans, by recommencing reporting via the reporting form ARF 923.2 on COVID-19 repayment deferrals that meet a minimum threshold. APRA also proposed to require authorized deposit-taking institutions to publicly disclose the nature and terms of repayment deferrals and the volume of loans to which they are applied, as in 2020. Collectively, these measures aim to assist institutions in supporting their small business, home loan, and other retail customers through this period. APRA intends to register APS 220 on the Federal Register of Legislation, with the standard commencing upon registration. Reporting requirements under ARF 923.2 have been communicated to the relevant authorized deposit-taking institutions.

     

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    Keywords: Asia Pacific, Australia, Banking, COVID-19, Credit Risk, Credit Quality, Loan Repayment, APS 220, APS 923.2, Payment Deferrals, Loan Moratorium, Lending, Reporting, APRA

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