Featured Product

    APRA Sets Out Policy and Supervisory Priorities for Banking Sector

    February 01, 2021

    APRA has set out the policy and supervisory priorities for financial sector for 2021. The key focus areas in terms of banking sector policies include working on prudential standards on remuneration, resolution and recovery planning, operational risk, and governance and risk management; completing the ongoing review of the capital framework; and consulting on guidance for climate change financial risk. APRA also plans to introduce APRA Connect, the new data collection solution, to enable APRA to collect more granular data, strengthen data-driven decision-making, and enable enhanced data submission capabilities. The key supervisory priorities focus on actions on crisis readiness, including recovery, resolution planning, and stress testing; increased scrutiny of cyber-security capabilities of entities; and initiatives in the area of governance, risk culture, remuneration, and accountability—also known as GCRA.

    Consistent with the strategic priorities outlined in the Corporate Plan for 2020-2024, the policy and supervisory priorities for the financial sector aim to deliver four key outcomes: maintaining financial system resilience, improving outcomes for superannuation members, improving cyber-resilience, and transforming GCRA across all regulated institutions. APRA has set out the following the key policy priorities for the banking sector:

    • Capital requirements. The finalization of revisions to the capital framework for authorized deposit-taking institutions is a key policy priority for 2021. The draft prudential standards for the revised capital framework will be finalized by the end of 2021, along with the requirements for interest rate risk in the banking book. This timeline will provide the industry with a 12-month implementation period before the revised framework comes into effect on January 01, 2023. APRA will also consult on the updated prudential practice guides and reporting standards to accompany the revised capital standards in 2021. Consultation on consequential amendments to other prudential standards is expected to commence in the second half of 2021. APRA also intends to consider policy options for the fundamental review of the trading book in 2021 and for the role of Additional Tier 1 instruments in providing loss-absorbing capacity. APRA intends to finalize the changes to Prudential Standard APS 111 on capital adequacy in 2021, with the revised standard expected to take effect from January 01, 2022.
    • Disclosure requirements. APRA intends to consult on a draft APS 330 on public disclosure in the second half of 2021. The consultation will include a proposal to reduce the disclosure burden for smaller authorized deposit-taking institutions through centralized publication by APRA. 
    • Credit risk requirements. APRA may consult on minor amendments to the Prudential Practice Guide APG 223 on residential mortgage lending and anticipates releasing the finalized APG 220 on credit risk management in the first half of 2021. APRA also plans to finalize the proposed Reporting Standard ARS 220.0 on credit exposures and provisions in 2021. 
    • Crisis management framework. As part of strengthening the crisis preparedness, APRA will develop a new prudential standard for recovery and resolution planning. APRA expects to progress the development of the prudential standard in the year ahead and plans to consult on this standard in late 2021 or early 2022.
    • Operational resilience. APRA plans to consult on new and revised standards for operational resilience. This is expected to include the introduction of a new prudential standard focused on operational risk management, revisions to the existing prudential standards CPS 231 on outsourcing and CPS 232 on business continuity management, and guidance for entities. 
    • Stress testing. Building on lessons learned from the recent and previous supervisory industry exercises, APRA intends to consult on new guidance for entities on stress testing in late 2021.
    • Climate-related financial risk. APRA plans to consult , in the first half of 2021, on the guidance on developing frameworks for assessment and monitoring of climate-related financial risks. This includes governance, strategy, risk management, scenario analysis, and disclosure. The guidance is expected to be released for consultation in the first half of 2021 and finalized before the end of the year. 
    • Governance, risk culture, remuneration, and accountability. The review of the governance and risk management prudential standards will continue in 2021. APRA intends to consult on revised versions of CPS 510 on governance and CPS 220 on risk management in 2022. APRA intends to finalize and release the new standard on remuneration in mid-2021, ahead of a phased implementation from 2023. CPS 511 on remuneration will be supported by a new prudential practice guide and reporting and disclosure requirements, which will be consulted on in mid to late 2021.

    One of the key supervisory priorities for this year involves review of climate change issues, including climate change vulnerability assessment. As part of APRA’s actions to both uplift the scenario analysis capability and strengthen the understanding and management of climate-related risks within the financial sector, APRA, along with the Council of Financial Regulators (CFR), is leading the work on a climate vulnerability assessment. Beginning with large authorized deposit-taking institutions in 2021, through the climate vulnerability assessment, APRA will explore the potential financial exposure and macroeconomic risks, from both physical and transition risks, to large authorized deposit-taking institutions, the financial system, and the economy. This exercise will help APRA to understand how the large authorized deposit-taking institutions might adjust their business models in response to different climate change scenarios. APRA is in the process of designing the climate vulnerability assessment and expects to engage with the authorized deposit-taking institutions participating in the assessment in 2021. 

     

    Related Links

    Keywords: Asia Pacific, Australia, Banking, Policy Priorities 2021, Basel, Resolution Framework, Operational Risk, Credit Risk, ESG, Climate Change Risk, Regulatory Capital, Interest Rate Risk, Reporting, Disclosures, Stress Testing, APRA

    Featured Experts
    Related Articles
    News

    FDIC Proposes Amendments to Real Estate Lending Standards

    FDIC is seeking comments on a rule to amend the interagency guidelines for real estate lending policies—also known as the Real Estate Lending Standards.

    June 15, 2021 WebPage Regulatory News
    News

    ISDA Consults on Implementation of Fallbacks for Certain Swap Rates

    ISDA is consulting on the implementation of fallbacks for the sterling LIBOR ICE Swap Rate and for the USD LIBOR ICE Swap Rate.

    June 11, 2021 WebPage Regulatory News
    News

    BIS and BoE Launch Innovation Hub in London

    BIS and BoE launched the BIS Innovation Hub Center in London, which is the fourth new Innovation Hub Centre to be opened in the past two years.

    June 11, 2021 WebPage Regulatory News
    News

    ESRB Recommends Reciprocation of Certain Macroprudential Measures

    ESRB published recommendations on the reciprocation of macro-prudential measures in Belgium, France, Luxembourg, Norway, and Sweden.

    June 11, 2021 WebPage Regulatory News
    News

    US Agencies Set Out Unified Agenda for Planned Regulatory Actions

    SEC announced that the Office of Information and Regulatory Affairs released the Spring 2021 Unified Agenda of Regulatory and Deregulatory Actions.

    June 11, 2021 WebPage Regulatory News
    News

    EC Publishes Regulation on Key Aspects of Implementation of SA-CCR

    EC published the Delegated Regulation 2021/931, which supplements the Capital Requirements Regulation (CRR or Regulation 575/2013) with regard to the regulatory technical standards specifying the method for identifying derivative transactions with one or more than one material risk driver.

    June 10, 2021 WebPage Regulatory News
    News

    BCBS Consults on Prudential Treatment of Cryptoasset Exposures

    BCBS is consulting on preliminary proposals for the prudential treatment of cryptoasset exposures of banks.

    June 10, 2021 WebPage Regulatory News
    News

    EBA Revises List of Validation Rules for Reporting

    EBA issued a revised list of validation rules under the implementing technical standards on supervisory reporting.

    June 10, 2021 WebPage Regulatory News
    News

    Banking Authorities and Private Sector Collaborate on Wholesale CBDC

    BIS Innovation Hub, BDF, and SNB announced that, together with a private-sector consortium led by Accenture, they will conduct an experiment using wholesale central bank digital currency (wCBDC) for cross-border settlement.

    June 10, 2021 WebPage Regulatory News
    News

    ESAs Publish Amended Implementing Standards on Mapping of ECAIs

    ESAs published two amended implementing technical standards on the mapping of credit assessments of External Credit Assessment Institutions (ECAIs).

    June 10, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 7093