APRA Finalizes Credit Risk Management Standard and Associated Changes
The Australian Prudential Regulation Authority (APRA) finalized amendments its macro-prudential policy framework, along with the associated revisions to the prudential standard on credit risk management (APS 220). It also decided to update its Quarterly Authorized Deposit-taking Institution Performance (QADIP) and Quarterly Authorized Deposit-taking Institution Property Exposures (QPEX) statistical publications. APRA also published its response to the proposed changes to the quarterly statistical publications, along with the mock-up tables with updated explanatory notes and the updated QADIP and QPEX glossaries.
The new macro-prudential policy framework has been given effect through new requirements on authorized deposit-taking institutions set out in an attachment (Attachment C) to the prudential standard for credit risk management (APS 220). The Attachment C includes a set of credit-based macroprudential measures that APRA could use, if needed, to address risks to financial stability. The Attachment applies to credit exposures in Australia where the majority of the collateral value securing the loan is located in Australia, or for unsecured loans where the ultimate risk of the exposure is located in Australia. Banks will need to have systems in place to limit growth in higher risk residential mortgage lending, such as loans at high debt-to-income multiples or high loan-to-valuation ratios. APRA may require institutions to publicly disclose the level of lending against any limits specified by APRA, for the period in which the limits apply. Institutions will be required to meet the new requirements from September 01, 2022. To ensure appropriate alignment with the final Attachment C to APS 220, APRA is also making corresponding amendments to relevant guidance and reporting standards:
- APRA updated prudential practice guide on residential mortgage lending (APG 223) to align with new requirements for a prudent setting of the serviceability buffer.
- APRA updated cross-references across relevant reporting standards, including reporting standard on residential mortgage lending (ARS 223).
Changes to Quarterly Statistical Publications were proposed in February 2022, with the aim to accommodate the new APS 220, notably to continue the publication of data regarding non-performing loans. APRA received two submissions: one confidential submission from an authorized deposit-taking institution and one non-confidential submission from the Australian Banking Association (ABA submission). The ABA advocated for postponing the first publication until later this year, giving the authorized deposit-taking institutions sufficient time to identify and correct any underlying data issues in the new reporting form. However, APRA intends to release the quarterly statistical publications on schedule, as no significant data issues have been identified in the first quarterly submissions and the data on asset quality is key to monitoring the health of the banking system. In the given situation, APRA views the risk of delaying the publication of key data series as greater than the risk of potential data quality concerns. Thus, APRA will proceed with the proposed updates to QADIP and QPEX, with the updated statistical publications slated to be first released on June 14, 2022, for the March 2022 reference period.
Related Links
- Press Release on Macro-Prudential Policy
- Letter and Updated Standards
- Press Release on Quarterly Statistical Publications
- Response to Proposal on Quarterly Statistical Publications
- Updates on Quarterly Statistical Publications
Keywords: Asia Pacific, Australia, Banking, Credit Risk, APS 220, Lending, Reporting, ARS 223, Macro-Prudential Policy, RRE, QADIP, QPEX, Statistical Reporting, APRA
Featured Experts
David Fihrer
Skilled life insurance actuary; subject matter expert on IFRS 17 and source of earnings
Salman Siddiqui
ESG and climate expert for P&C insurance; IFRS 17 specialist and chartered accountant; extensive experience in both life and non-life insurance, with focus on capital management, financial performance, and financial reporting.
Previous Article
UK Authorities Issue Regulatory and Reporting Updates for BanksRelated Articles
BIS and Central Banks Experiment with GenAI to Assess Climate Risks
A recent report from the Bank for International Settlements (BIS) Innovation Hub details Project Gaia, a collaboration between the BIS Innovation Hub Eurosystem Center and certain central banks in Europe
Nearly 25% G-SIBs Commit to Adopting TNFD Nature-Related Disclosures
Nature-related risks are increasing in severity and frequency, affecting businesses, capital providers, financial systems, and economies.
Singapore to Mandate Climate Disclosures from FY2025
Singapore recently took a significant step toward turning climate ambition into action, with the introduction of mandatory climate-related disclosures for listed and large non-listed companies
SEC Finalizes Climate-Related Disclosures Rule
The U.S. Securities and Exchange Commission (SEC) has finalized the long-awaited rule that mandates climate-related disclosures for domestic and foreign publicly listed companies in the U.S.
EBA Proposes Standards Related to Standardized Credit Risk Approach
The European Banking Authority (EBA) has been taking significant steps toward implementing the Basel III framework and strengthening the regulatory framework for credit institutions in the EU
US Regulators Release Stress Test Scenarios for Banks
The U.S. regulators recently released baseline and severely adverse scenarios, along with other details, for stress testing the banks in 2024. The relevant U.S. banking regulators are the Federal Reserve Bank (FED), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).
Asian Governments Aim for Interoperability in AI Governance Frameworks
The regulatory landscape for artificial intelligence (AI), including the generative kind, is evolving rapidly, with governments and regulators aiming to address the challenges and opportunities presented by this transformative technology.
EBA Proposes Operational Risk Standards Under Final Basel III Package
The European Union (EU) has been working on the final elements of Basel III standards, with endorsement of the Banking Package and the publication of the European Banking Authority (EBA) roadmap on Basel III implementation in December 2023.
EFRAG Proposes XBRL Taxonomy and Standard for Listed SMEs Under ESRS
The European Financial Reporting Advisory Group (EFRAG), which plays a crucial role in shaping corporate reporting standards in European Union (EU), is seeking comments, until May 21, 2024, on the Exposure Draft ESRS for listed SMEs.
ECB to Expand Climate Change Work in 2024-2025
Banking regulators worldwide are increasingly focusing on addressing, monitoring, and supervising the institutions' exposure to climate and environmental risks.
