March 25, 2019

APRA is proposing to update its prudential standard on credit risk management requirements for authorized deposit-taking institutions. To this end, APRA released a discussion paper proposing changes to the Prudential Standard APS 220 Credit Quality (APS 220), which requires authorized deposit-taking institutions to control credit risk by adopting prudent credit risk management policies and procedures. APRA is proposing to rename APS 220 as Prudential Standard APS 220 Credit Risk Management (the revised APS 220) to better describe the purpose of the revised standard. APRA intends to implement the proposed reforms to APS 220 from July 01, 2020.

The discussion paper outlines the proposals of APRA in the following areas:

  • Credit risk management—The revised APS 220 broadens coverage to include credit standards and the ongoing monitoring and management of an authorized deposit-taking institution’s credit portfolio in more detail. It also incorporates enhanced Board oversight of credit risk and the need for authorized deposit-taking institutions to maintain prudent credit risk practices over the credit life-cycle.
  • Credit standards—The revised APS 220 incorporates outcomes from APRA's recent supervisory focus on credit standards and addresses recommendations from the Final Report of the Royal Commission in relation to the valuation of land taken as collateral by the authorized deposit-taking institutions.
  • Asset classification and provisioning—The revised APS 220 provides a more consistent classification of credit exposures, by aligning recent accounting standard changes on loan provisioning requirements (under AASB 9), as well as other guidance on credit-related matters of BCBS.

Since 2006, when APS 220 was substantially updated, credit risk practices have significantly evolved, with the emergence of more sophisticated analytical techniques and information systems. Consequently, APRA is planning to modernize the standard. An accompanying prudential practice guide and revised reporting standards will be released for consultation later in 2019. APRA expects that the final prudential standard, prudential practice guide, and reporting standards will be released by the end of 2019.

 

Related Links

Effective Date: July 01, 2020 (Proposed)

Keywords: Asia Pacific, Australia, Banking, Credit Risk Management, APS 220, Credit Risk, AASB 9, IFRS 9, APRA

Related Articles
News

FSB to Evaluate Effects of Too-Big-To-Fail Reforms for Systemic Banks

FSB is seeking feedback as part of its evaluation of the effects of the too-big-to-fail reforms for banks.

May 23, 2019 WebPage Regulatory News
News

APRA Releases Minor Changes to Reporting Standards on SA-CCR for Banks

APRA released minor changes to the three reporting standards for the standardized approach for measuring counterparty credit risk exposures (SA-CCR).

May 22, 2019 WebPage Regulatory News
News

APRA on Industry Self-Assessments into Governance and Accountability

APRA released an information paper analyzing the self-assessments performed by 36 of the country’s largest banks, insurers, and superannuation licensees in response to the final report on the Prudential Inquiry into the Commonwealth Bank of Australia (CBA).

May 22, 2019 WebPage Regulatory News
News

PRA Consults on Maintenance of TMTP Under Solvency II

PRA published a consultation paper (CP11/19) that sets out its approach to update supervisory statement (SS6/16) on maintenance of the transitional measure on technical provisions (TMTP) under Solvency II.

May 22, 2019 WebPage Regulatory News
News

APRA Proposes to Amend Guidance on Residential Mortgage Lending

APRA is consulting on revisions to the prudential practice guide APG 223 on residential mortgage lending in Australia.

May 21, 2019 WebPage Regulatory News
News

IASB Proposes Improvements to IFRS 9 and IFRS 16

IASB published the exposure draft ED 2019/2 that proposes amendments to four IFRS standards, including IFRS 9 on Financial Instruments and IFRS 16 on Leases.

May 21, 2019 WebPage Regulatory News
News

Denis Beau of BDF on Supervisory Priorities for Climate-Change Risks

Denis Beau, the First Deputy Governor of BDF, delivered opening remarks at the BCBS-BSCEE-FSI High-level Meeting for Europe on banking supervision.

May 21, 2019 WebPage Regulatory News
News

ISDA CDM to be Deployed for UK Digital Regulatory Reporting Pilot

ISDA announced deployment of the ISDA Common Domain Model (ISDA CDM 2.0) to support the UK FCA, BoE, and participating financial institutions in testing phase two of the Digital Regulatory Reporting pilot for derivatives.

May 21, 2019 WebPage Regulatory News
News

MAS to Consolidate Regulation of Merchant Banks Under Banking Act

MAS published a consultation paper that proposes to consolidate the regulation of merchant banks under the Banking Act and to move merchant banks to a licensing regime under the MAS Act.

May 21, 2019 WebPage Regulatory News
News

ESAs Amend Technical Standards on Mapping of ECAIs Under CRR

ESAs published a second amendment to the implementing technical standards on the mapping of credit assessments of External Credit Assessment Institutions (ECAIs) for credit risk under the Capital Requirements Regulation (CRR).

May 20, 2019 WebPage Regulatory News
RESULTS 1 - 10 OF 3118