General Information & Client Service
  • Americas: +1.212.553.1653
  • Asia: +852.3551.3077
  • China: +86.10.6319.6580
  • EMEA: +44.20.7772.5454
  • Japan: +81.3.5408.4100
Media Relations
  • New York: +1.212.553.0376
  • London: +44.20.7772.5456
  • Hong Kong: +852.3758.1350
  • Tokyo: +813.5408.4110
  • Sydney: +61.2.9270.8141
  • Mexico City: +001.888.779.5833
  • Buenos Aires: +0800.666.3506
  • São Paulo: +0800.891.2518
July 04, 2017

APRA issued a letter setting out its expectations on the regulatory treatment of AASB 9 expected credit loss (ECL) provisions and possible transition arrangements. All authorized deposit-taking institutions are required to apply AASB 9 Financial Instruments (AASB 9) for annual reporting periods beginning on or after January 01, 2018.

BCBS had recently finalized an interim provisioning approach that retains the current regulatory treatment of accounting for ECL provisions. BCBS recommended that regulatory authorities should provide guidance, as appropriate, on how they intend to categorize ECL provisions as General Provisions or Specific Provisions in their jurisdiction. When applying the Prudential Standard APS 220 Credit Quality (APS 220) requirements (paragraphs 39, 42, 43, 46–49), APRA expects authorized deposit-taking institutions to adopt the following approach to the three AASB 9 provisioning stages:

Stage 1 (representing 12-month ECL provisions on performing loans)—Allocate to General Reserve for Credit Losses (GRCL), if held against future, presently unidentified losses and, therefore, freely available to meet losses that subsequently materialize.

Stage 2 (representing lifetime ECL provisions on underperforming loans)—Consider as Specific Provision for regulatory purposes. However, any portion that represents an amount for future, presently unidentified losses, would qualify as GRCL.

Stage 3 (representing lifetime ECL provisions on nonperforming loans)—Consider as Specific Provision for regulatory purposes.


The GRCL amount that may be included in tier 2 Capital, gross of tax effects, under the Prudential Standard APS 111 Capital Adequacy: Measurement of Capital (APS 111) (paragraph 32) remains unchanged. APRA already has adopted a GRCL concept in APS 220 that reflects a lifetime ECL concept within its prudential framework. APRA’s informal consultation has indicated that regulated entities will not need transitional arrangements. However, if entities believe that their capital position will be significantly affected, they should approach APRA for discussion on possible transition arrangements. APRA intends to update APS 220 in due course to reflect the appropriate treatment of provisions under AASB 9.


Related Link: Letter on AASB 9 (PDF)

Keywords: Asia Pacific, Australia, APRA, AASB 9, IFRS 9, ECL, APS 220

Related Articles

BCBS Publishes Results of Survey on Proportionality in Bank Regulation

BCBS published a report presenting the results of a survey conducted on proportionality practices in bank regulation and supervision.

March 19, 2019 WebPage Regulatory News

EBA Single Rulebook Q&A: Third Update for March 2019

EBA published answers to seven questions under the Single Rulebook question and answer (Q&A) updates for this week.

March 15, 2019 WebPage Regulatory News

US Agencies Adopt Interim Rule to Facilitate Transfers of Legacy Swaps

US Agencies (FCA, FDIC, FED, FHFA, and OCC) are adopting and inviting comments on an interim final rule.

March 15, 2019 WebPage Regulatory News

OCC Updates Recovery Planning Booklet of the Comptroller's Handbook

OCC updated the Recovery Planning booklet of the Comptroller’s Handbook.

March 15, 2019 WebPage Regulatory News

EBA Publishes Report on Convergence of Supervisory Practices Across EU

EBA published annual report on the convergence of supervisory practices in EU.

March 14, 2019 WebPage Regulatory News

CPMI-IOSCO Publish Update to Level 1 Assessment of PFMI Implementation

CPMI and IOSCO jointly updated the Level 1 Assessment Online Tracker on monitoring of the implementation of the Principles for financial market infrastructures (PFMI).

March 14, 2019 WebPage Regulatory News

Agustín Carstens of BIS Speaks About New Role of Central Banks

While speaking at the 20th anniversary conference of the Financial Stability Institute (FSI), Agustín Carstens, the General Manager of BIS, highlighted the need for regulatory actions in light of the continued evolution of financial technology.

March 14, 2019 WebPage Regulatory News

PRA Publishes Policy Statement on Group Supervision Under Solvency II

PRA published a policy statement (PS9/19) that provides feedback on responses to the consultation paper CP15/18 and the final supervisory statement SS9/15 (Appendix) on group supervision under Solvency II.

March 14, 2019 WebPage Regulatory News

ECB Announces Start Date for Euro Short-Term Rate

ECB announced that it will start publishing the euro short-term rate (€STR) as of October 02, 2019, reflecting the trading activity of October 01, 2019.

March 14, 2019 WebPage Regulatory News

PRA Proposes to Update the Pillar 2 Capital Framework for Banks

PRA is proposing (CP5/19) to update the Pillar 2 capital framework to reflect continued refinements and developments in setting the PRA buffer (Pillar 2B).

March 13, 2019 WebPage Regulatory News
RESULTS 1 - 10 OF 2754