The Australian Prudential Regulation Authority (APRA) released a new set of frequently asked questions (FAQs) on the prudential standard on credit risk management (APS 220) for authorized deposit-taking institutions.
APS 220—most requirements for which was slated to be enforced from January 01, 2022—applies to all activities of the authorized deposit-taking institutions that give rise to credit risk, except exposures that have been securitized, transferred, or originated into securitization vehicles that meet operational requirements for regulatory capital relief in the prudential standard on securitization (APS 120). The FAQs on credit risk management provide information to assist authorized deposit-taking institutions to interpret APS 220 and the associated reporting standards and include clarifications on the following key issues:
- Following the removal of certain items from APS 220, APRA states that authorized deposit-taking institutions should continue to make Pillar 3 disclosures based on the current APS 330, using the terms as defined in APS 330: for example, "impaired" and "past due," as defined in Prudential Standard APS 220 Credit Quality (revoked APS 220). When APS 330 is next revised, APRA plans to make the appropriate changes to update these terms.
- APRA intends to make changes to APRA reporting forms to reflect the removal of the requirement to hold a General Reserve for Credit Losses, or GRCL, in APS 220 when the relevant reporting forms are next updated. In this context, APRA clarified that provisions eligible to be included in tier 2 capital should continue to be reported under the General Reserve for Credit Losses item in APRA reporting forms.
- APRA clarified that authorized deposit-taking institutions should not treat "Fully Secured" in ARS 742.0 as equivalent to "Well-Secured" in ARS 220.0. While there is a large overlap between the definitions of "Fully Secured" and "Well-Secured," there are also a number of differences that mean they are not exactly equivalent.
- The FAQs note APRA expects there will be an overlap between the reporting categories of "90 days past due, " "non-performing, " "stage 2"," and "restructured " in ARS 220.0. APRA does not believe that these terms are mutually exclusive. APRA also understands that there may be some limited circumstances where overlap between "stage 2" and "restructured" may occur.
Keywords: Asia Pacific, Australia, Banking, Basel, Reporting, Regulatory Capital, Credit Risk, FAQ, Disclosures, ECL, APS 220, Pillar 3, APS 330, ARS 220, ARS 742, APRA
Previous ArticleFI Publishes Regulatory Updates for Banks and Investment Firms
The European Banking Authority (EBA) published its work program for 2023 as well as the technical package for phase 3 of version 3.2 of its reporting framework.
The Board of Governors of the Federal Reserve System (FED) announced a pilot climate scenario analysis exercise for six largest banks in the U.S.
The Bank for International Settlements (BIS) published a paper that studies impact of fintech lending on credit access for small businesses in U.S.
The Prudential Regulation Authority (PRA) issued the policy statement PS8/22 to amend the Own Funds and Eligible Liabilities (CRR) Part of the PRA Rulebook and update the supervisory statement SS7/13 titled "Definition of capital (CRR firms).
The European Banking Authority (EBA) launched the EU-wide transparency exercise for 2022, with results of the exercise expected to be published at the beginning of December, along with the annual Risk Assessment Report.
The Single Resolution Board (SRB) welcomed the adoption of the review of the Capital Requirements Regulation, or CRR, also known as the "CRR quick-fix."
The European Commission (EC) recently adopted the Delegated Regulation 2022/1622, which sets out the regulatory technical standards to specify the countries that constitute advanced economies for the purpose of specifying risk-weights for the sensitivities to equity.
The European Banking Authority (EBA) published the final draft regulatory technical standards specifying and, where relevant, calibrating the minimum performance-related triggers for simple.
The European Central Bank (ECB) is undertaking the integrated reporting framework (IReF) project to integrate statistical requirements for banks into a standardized reporting framework that would be applicable across the euro area and adopted by authorities in other EU member states.
The European Banking Authority (EBA) has been awarded the top European Standard for its environmental performance under the European Eco-Management and Audit Scheme (EMAS).