APRA required several banks in Australia to tighten the intra-group funding arrangements for their Australian operations. Following a review of funding agreements across the authorized deposit-taking industry, APRA has notified Macquarie Bank Limited, Rabobank Australia Limited, and HSBC Bank Australia Limited that the reporting of their intra-group funding as stable has been in breach of the prudential liquidity standard APS 210. APRA also updated the frequently asked questions by adding a clarification on the treatment of funding under APS 210.
The review found that the above-mentioned banks were improperly reporting the stability of the funding they received from other entities within the group. These banks had provisions in their funding agreements that would potentially allow the group funding to be withdrawn in a stress scenario, undermining the stability of the Australian bank. APRA is requiring these banks to strengthen intra-group agreements to ensure that term funding cannot be withdrawn in a financial stress scenario. APRA is also requiring these banks to restate their past funding and liquidity ratios in case these had been reported incorrectly. Supervisors are also considering a range of further options, including the imposition of higher funding and liquidity requirements on these institutions.
Keywords: Asia Pacific, Australia, Banking, APS 210, Intra Group Funding, Funding Requirements, FAQ, Liquidity Risk, APRA
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