APRA proposed changes to the requirements for authorized deposit-taking institutions in managing risks from associations with related parties. The consultation outlines revisions to the Prudential Standard APS 222 Associations with Related Entities and the associated reporting standard ARS 222.0 Exposures to Related Entities. Comments period for the proposed revisions will expire on September 28, 2018 and the framework is expected to be finalized and implemented from January 01, 2020.
The prospective changes seek to update and, where possible, streamline long-standing requirements and ensure that APS 222 aligns with last year’s changes to the Prudential Standard APS 221 Large Exposures (for exposures to unrelated parties of an authorized deposit-taking institution) and the changed operating environment. Deficiencies in governance and internal controls in relation to related party dealings can lead to financial or reputational damage in one business affecting other parts of the business. The APRA proposals to modernize the framework include:
- Broadening the definition of related entities to include substantial shareholders, individual board directors, and other related individuals
- Explicitly addressing "step-in risk" by incorporating guidance from BCBS
- Tightening certain limits on exposure to related entities, in line with limits on exposures to unrelated entities in the revised APS 221
- Removing the ability for certain overseas subsidiaries to be consolidated with the standalone authorized deposit-taking institutions for prudential purposes
- Updating the existing reporting requirements to align with the changes to the framework
Comment Due Date: September 28, 2018
Effective Date (expected): January 01, 2020
Keywords: Asia Pacific, Australia, Banking, Related Party Framework, APS 222, ARS 222, APRA
Previous ArticleUS Agencies Publish Sections of Resolution Plans Due in July 2018
HKMA is consulting on revisions to the Supervisory Policy Manual module CR-G-14 on margin and other risk mitigation standards for non-centrally cleared over-the-counter (OTC) derivatives transactions.
EBA published thematic note presenting a preliminary assessment of the impact of COVID-19 outbreak on the banking sector in EU.
PRA provided further information on the application of regulatory capital and IFRS 9 requirements to payment holidays granted or extended to address the challenges arising from COVID-19 outbreak.
PRA published final policy (in PS13/20) setting out the approach and expectations for authorization and supervision of insurance special purpose vehicles (ISPVs or insurance SPVs).
BoE published version 2.0.1 of the Capital+ XBRL Utility, along with the related release notes.
HKMA announced the publication of a report on fintech adoption and innovation in the banking industry in Hong Kong.
BIS published a working paper that examines the drivers of cyber risk, especially in context of the cloud services.
ECB launched consultation on a guide specifying how the Banking Supervision expects banks to consider climate-related and environmental risks in their governance and risk management frameworks and when formulating and implementing their business strategy.
ECB published an opinion (CON/2020/16) on amendments to the prudential framework in EU in response to the COVID-19 pandemic.
EBA published a report that examines the interlinkages between recovery and resolution planning under the Bank Recovery and Resolution Directive (BRRD).