July 26, 2017

APRA proposed revisions to the capital framework for mutually owned authorized deposit-taking institutions (ADIs) to enable them to directly issue common equity tier 1 (CET1) capital instruments. The proposed changes are intended to give mutually owned ADIs more flexibility in their capital management. APRA is also releasing for consultation draft revisions to Prudential Standard APS 111 Capital Adequacy: Measurement of Capital (APS 111).

The consultation is about the proposed amendments to the Mutual Equity Interest (MEI) framework to allow mutually owned ADIs to issue CET1-eligible capital instruments directly. The proposed CET1-eligible capital instruments would share many of the same characteristics as ordinary shares and would, for example, be perpetual, subject to discretionary dividends and accounted for as equity. However, because these instruments are untested, APRA is proposing some restrictions on the amount that may be included in CET1 and, to accommodate the mutual corporate structure of issuing ADIs, proposes limits on MEI holders’ share of residual assets. Following the consideration of submissions received through this consultation, APRA anticipates it will release the final revised APS 111 in late 2017 for commencement as soon as practicable thereafter.

 

In 2014, APRA developed a Mutual Equity Interest (MEI) framework for mutually owned ADIs that enables them to issue additional tier 1 and tier 2 capital instruments that meet requirements for conversion into CET1 capital in certain circumstances. Because of their structure, mutually owned ADIs have traditionally not been able to issue ordinary shares that could qualify as CET1 capital.

 

Related Links

Discussion Paper (PDF)

Draft Revisions to APS 111 (PDF)

Comment Due Date: September 08, 2017

Keywords: Asia Pacific, Australia, Banking, CET1, Capital Framework, APS 111, APRA

Related Articles
News

BIS Report Discusses Regulatory Issues Related to Big Techs in Finance

BIS has pre-released a chapter of the BIS Annual Economic Report; this chapter focuses on the risks and opportunities presented by large technology firms (big techs) in the financial services sector.

June 23, 2019 WebPage Regulatory News
News

IOSCO Report Examines Liquidity in Corporate Bond Markets

IOSCO published a report that examines the factors affecting liquidity, under stressed conditions, in the secondary corporate bond markets.

June 21, 2019 WebPage Regulatory News
News

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

Under the Single Rulebook question and answer (Q&A) updates for this week, EBA published one answer regarding the calculation of institution-specific countercyclical capital buffer rates.

June 21, 2019 WebPage Regulatory News
News

HKMA Publishes Banking Exposure Limits Code Under Banking Ordinance

HKMA issued a circular to all authorized institutions informing that the Banking (Exposure Limits) Code has been published in the Gazette on June 21, 2019.

June 21, 2019 WebPage Regulatory News
News

BCBS Report Examines Global Pillar 2 Supervisory Review Practices

BCBS published a report that examines the Pillar 2 supervisory review practices and approaches in Basel member jurisdictions.

June 21, 2019 WebPage Regulatory News
News

FED Publishes Results of the 2019 Stress Tests for Banks

FED published a report presenting results of the Dodd-Frank Act Stress Test (DFAST) exercise for 2019.

June 21, 2019 WebPage Regulatory News
News

IASB Publishes Work Plan and Meeting Updates for June 2019

IASB published an updated work plan and a summary of its June meeting, which presents preliminary decisions of the Board.

June 21, 2019 WebPage Regulatory News
News

OSFI Proposes Guideline on Internal Model Oversight for Insurers

OSFI proposed the draft guideline E-25 on the internal model oversight framework for federally regulated property and casualty (P&C) insurance companies.

June 21, 2019 WebPage Regulatory News
News

BCBS Publishes Summary of the Meeting in June 2019

BCBS published a summary of its June meeting in Basel.

June 20, 2019 WebPage Regulatory News
News

OCC Bulletin on Risk Management Guidance for Home Mortgage Lending

OCC published Bulletin 2019-28 on risk management guidance for higher-loan-to-value (LTV) lending activities in communities targeted for revitalization.

June 19, 2019 WebPage Regulatory News
RESULTS 1 - 10 OF 3298