General Information & Client Services
  • 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 Insights
News

IAIS Publishes Drafts of Revised ICP 8, ICP 15, ICP 16, and ICP 20

IAIS published the drafts of revised Insurance Core Principles on Public Disclosure (ICP 20), Investments (ICP 15), Enterprise Risk Management for Solvency Purposes (ICP 16), and Risk Management and Internal Controls (ICP 8), along with a revised draft of the glossary on enterprise risk management (ERM).

November 14, 2018 WebPage Regulatory News
News

MAS Amends Notice 637 on Capital Adequacy Requirements in Singapore

MAS published the final, revised Notice 637 on the risk-based capital adequacy requirements in Singapore.

November 13, 2018 WebPage Regulatory News
News

ESMA Updates Q&A on Implementation of CSD Regulation and MAR

ESMA updated questions and answers (Q&A) documents on the implementation of the Central Securities Depository (CSD) Regulation and Market Abuse Regulation (MAR).

November 12, 2018 WebPage Regulatory News
News

FSB Finalizes and Publishes the Cyber Lexicon

FSB published a cyber lexicon, following the public consultation earlier this year.

November 12, 2018 WebPage Regulatory News
News

SRB Updates Liability Data Reporting Template for 2019

SRB published version 2.7.1 of the Liability Data Reporting (LDR) Template.

November 12, 2018 WebPage Regulatory News
News

ECB to Conduct Comprehensive Assessment of Six Bulgarian Banks

ECB will undertake a comprehensive assessment of six Bulgarian banks. The exercise, comprising an asset quality review and a stress test, follows Bulgaria’s submission of a request to establish close cooperation with ECB on July 18, 2018.

November 12, 2018 WebPage Regulatory News
News

IMF Publishes Reports on the 2018 Article IV Consultation with Chile

IMF published its staff report and selected issues report under the 2018 Article IV consultation with Chile.

November 09, 2018 WebPage Regulatory News
News

PRA Issues PS27/18 on Implementing the Extension of SM&CR to Insurers

PRA published the policy statement PS27/18, which provides feedback to responses to the consultation paper CP20/18, on implementing the extension of the Senior Managers and Certification Regime (SM&CR) to insurers (Part 2).

November 09, 2018 WebPage Regulatory News
News

EBA Single Rulebook Q&A: First Update for November 2018

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

November 09, 2018 WebPage Regulatory News
News

FED Finalizes the Large Financial Institution Rating System

FED finalized the new supervisory rating system for Large Financial Institutions (LFIs), to better align with the current supervisory programs and practices for these firms.

November 09, 2018 WebPage Regulatory News
RESULTS 1 - 10 OF 2204