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    APRA to Launch Climate Risk Survey, Review Basel Liquidity Reforms

    March 02, 2022

    The Australian Prudential Regulation Authority (APRA) revoked the authorized deposit-taking institution license of Members Equity Bank Limited (ME Bank), as the Bank of Queensland Limited acquired ME Bank in July 2021. APRA also released a cross-industry letter to advise on the purpose and timing of a voluntary climate risk self-assessment survey among medium-to-large regulated entities. Entities that choose to participate in the survey will have six weeks from receiving the questionnaire to provide their responses. Additionally, APRA published a discussion paper on the post-implementation review of the Basel III liquidity reforms. APRA is inviting feedback on the discussion paper by April 14, 2022.

    The post-implementation review of liquidity reforms seeks to determine how efficiently and effectively the liquidity coverage ratio (LCR) and net stable funding ratio (NSFR) are achieving their objectives. APRA is seeking feedback from relevant stakeholders on benefits to financial safety and system stability, compliance costs (upfront and ongoing), commercial costs (such as impact on the cost of funding), and impact on competition. APRA intends to release a report on the outcomes of the post-implementation review by mid-2022. The outcomes of the review will be used to inform a broader review of the liquidity requirements and this review is scheduled for 2023. The post-implementation review will inform the scope of a planned review and update of the prudential standard on liquidity (APS 210) in 2023.

    Coming back to the letter on climate risk self-assessment survey, APRA mentioned that the voluntary survey will gather insights on how APRA-regulated entities are managing climate-related financial risks, using the November 2021 prudential guide on climate change financial risks (CPG 229) as a benchmark. In addition to providing insights into the management of financial risks arising from climate change, the survey will help incorporate climate-related risks into the supervisory assessments of APRA. It will also improve comparability and benchmarking and practices within and across industry—and potentially internationally. Once the survey closes, APRA will provide participating entities with de-identified peer-comparison results to enable them to understand how their approaches and practices compare to peers as well as publish information on industry-level insights and themes from the results. APRA will also incorporate insights from the survey into its ongoing supervisory approaches to addressing the financial risks of climate change. APRA plans to consider the benefit of repeating the survey as well as the benefit of potentially expanding the survey to all regulated entities, to monitor how industry approaches to managing the financial risks of climate change are evolving over time.

     

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    Keywords: Asia Pacific, Australia, Banking, Bank Licenses, Climate Change Risk, ESG, Liquidity Risk, LCR, NSFR, Basel, APS 210, Climate Risk Survey, Liquidity Requirements, ME Bank, CPG 229, APRA

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