Featured Product

    APRA Proposes to Amend Guidance on Residential Mortgage Lending

    May 21, 2019

    APRA is consulting on revisions to the prudential practice guide APG 223 on residential mortgage lending in Australia. The possible revisions to the guidance apply to the serviceability assessments that authorized deposit-taking institutions perform on residential mortgage loan applications. This four-week consultation closes on June 18, 2019.

    Attachment A to the APRA letter on this consultation contains the text being modified in APG 223, which was earlier finalized in February 2017. APRA is seeking views on the proposed revisions to the guidance on the buffer and floor rates. APRA has proposed to:

    • Remove the quantitative guidance on the level of the serviceability floor rate, the reference to a specific 7% floor. APRA will still expect authorized deposit-taking institutions to determine, and keep under regular review, their own level of floor rate, but authorized deposit-taking institutions will be able to choose a prudent level based on their own portfolio mix, risk appetite, and other circumstances
    • Increase the expected level of the serviceability buffer from at least 2% (most authorized deposit-taking institutions currently use 2.25%) to 2.5%, to maintain prudence in overall serviceability assessments
    • Remove the expectation that a prudent authorized deposit-taking institution would use a buffer "comfortably above" the proposed 2.5%, to improve clarity of the prudential guidance.

    APRA considers that these changes will provide greater flexibility for authorized deposit-taking institutions to manage and set floor rates that reflect the outlook for interest rates, while still ensuring that sufficient prudence is retained in serviceability assessments through the proposed higher buffer rate. This move is not intended to signal any lessening in focus on the importance of sound lending standards, but to simply acknowledge that the current interest rate environment and the introduction of differential pricing may not warrant a uniform mandated interest rate floor of 7% across all products. APRA continues to expect that authorized deposit-taking institutions apply the buffer to new and existing debt, recognizing that for certain types of mortgage products higher buffers may be appropriate.

    APRA first introduced the serviceability guidance in December 2014 as part of its efforts to reinforce sound residential lending standards. The interest rate floor and buffer served an important purpose in limiting excessive borrowing in an environment of low interest rates and high household debt. The guidance was subsequently incorporated into Prudential Practice Guide APG 223 Residential Mortgage Lending, which APRA is now proposing to amend.


    Related Links

    Comment Due Date: June 18, 2019

    Keywords: Asia Pacific, Australia, Banking, Residential Mortgage Lending, Guidance, APG 223, Credit Risk, APRA

    Related Articles
    News

    ECB Amends Guideline on Temporary Collateral Easing Measures

    ECB published Guideline 2021/975, which amends Guideline ECB/2014/31, on the additional temporary measures relating to Eurosystem refinancing operations and eligibility of collateral.

    June 17, 2021 WebPage Regulatory News
    News

    EIOPA Releases Report on Artificial Intelligence Governance Principles

    EIOPA published a report, from the Consultative Expert Group on Digital Ethics, that sets out artificial intelligence governance principles for an ethical and trustworthy artificial intelligence in the insurance sector in EU.

    June 17, 2021 WebPage Regulatory News
    News

    HKMA to Increase Focus on Suptech and Regtech Cloud Adoption

    HKMA published the seventh and final issue of the Regtech Watch series, which outlines the three-year roadmap of HKMA to integrate supervisory technology, or suptech, into its processes.

    June 17, 2021 WebPage Regulatory News
    News

    EC Consults on Improving Transparency in Secondary Markets for NPLs

    EC launched a targeted consultation to improve transparency and efficiency in the secondary markets for nonperforming loans (NPLs).

    June 16, 2021 WebPage Regulatory News
    News

    BIS and Nordic Central Banks Launch Innovation Hub in Stockholm

    BIS, Danmarks Nationalbank, Central Bank of Iceland, Norges Bank, and Sveriges Riksbank launched an Innovation Hub in Stockholm, making this the fifth BIS Innovation Hub Center to be opened in the past two years.

    June 16, 2021 WebPage Regulatory News
    News

    FDIC Tech Sprint Aims to Explore Technologies to Reach Unbanked

    FDITECH, the technology lab of FDIC, announced a tech sprint that is designed to explore new technologies and techniques that would help expand the capabilities of community banks to meet the needs of unbanked individuals and households.

    June 16, 2021 WebPage Regulatory News
    News

    EC Releases Sustainable Finance Taxonomy Compass

    EC released the EU Taxonomy Compass, which visually represents the contents of the EU Taxonomy starting with the EU Taxonomy Climate Delegated Act.

    June 16, 2021 WebPage Regulatory News
    News

    FDIC Proposes Amendments to Real Estate Lending Standards

    FDIC is seeking comments on a rule to amend the interagency guidelines for real estate lending policies—also known as the Real Estate Lending Standards.

    June 15, 2021 WebPage Regulatory News
    News

    EIOPA to Consider Liquidity Risk in Stress Test for 2021

    EIOPA published its annual report, which sets out the work done in 2020 and indicates the planned work areas for the coming months.

    June 15, 2021 WebPage Regulatory News
    News

    ESRB Paper Discusses Measurement of Impact of Bank Failure via Lending

    The ESRB paper that presents an analytical framework that assesses and quantifies the potential impact of a bank failure on the real economy through the lending function.

    June 15, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 7116