Featured Product

    APRA on Interim Capital Treatment of Equity Investment in Subsidiaries

    November 10, 2020

    APRA issued a letter to all authorized deposit-taking institutions to advise of an interim change to the capital treatment of new or additional equity investments in banking and insurance subsidiaries. The planned finalization and implementation of the prudential standard APS 111 on "Capital Adequacy: Measurement of Capital" are now likely to be in 2021 and 2022, respectively; however, it is important that any new or additional equity investments made before then are undertaken with the proposed policy in mind. In the interim period, authorized deposit-taking institutions will be expected to notify APRA ahead of any new or additional equity investments in banking and insurance subsidiaries, which would result in the aggregate value of any investment exceeding 10% of the Common Equity Tier (CET)1 capital of an authorized deposit-taking institution.

    In October 2019, APRA had launched a consultation outlining planned revisions to the prudential standard APS 111. The most significant proposal in this set of revisions was an adjustment to the capital treatment of authorized deposit-taking institutions’ equity investments in banking and insurance subsidiaries. In the interim period, there will be no change to the capital treatment of any existing equity investments in the banking and insurance subsidiaries, with these exposures continued to be risk-weighted at 300% if listed or 400% if unlisted. However, until the new APS 111 is finalized and implemented, APRA will require any new or additional equity investments in banking and insurance subsidiaries, where the amount of that new or additional investments takes the aggregate value of the investment above 10% of an authorized deposit-taking institutions CET1 capital, to be fully funded by equity capital at the authorized deposit-taking institution parent company level. 

    This interim measure reflects the direction of the proposed APS 111, but does not impact existing investments. It also does not restrict or prohibit authorized deposit-taking institutions from making new investments or increasing their existing investments in banking and insurance subsidiaries in the period ahead. However, it will ensure that any new or additional equity investments, particularly where the aggregate value of the investment is large relative to the authorized deposit-taking institutions' CET1 capital, are backed by appropriate capital to reduce the risk to Australian depositors. 


    Related Links

    Keywords: Asia Pacific, Australia, Banking, Insurance, APS 111, Capital Adequacy, Equity Investment, Basel, Regulatory Capital, APRA

    Featured Experts
    Related Articles
    News

    EU Amends CRD4 and CRD5 as Part of Capital Markets Recovery Package

    EU published Directive 2021/338, which amends the Markets in Financial Instruments Directive (MiFID) II and the Capital Requirements Directives (CRD 4 and 5) to facilitate recovery from the COVID-19 crisis.

    February 26, 2021 WebPage Regulatory News
    News

    EU Committee Recommends Systemic Risk Buffer of 4.5% in Norway

    The Standing Committee of the European Free Trade Association (EFTA) recommended that a systemic risk buffer level of 4.5% for domestic exposures can be considered appropriate for addressing the identified systemic risks to the stability of the financial system in Norway.

    February 25, 2021 WebPage Regulatory News
    News

    PRA Clarifies Approach to Onshoring of Credit Risk Rules for UK Banks

    In a recent statement, PRA clarified its approach to the application of certain EU regulatory technical standards and EBA guidelines on standardized and internal ratings-based approaches to credit risk, following the end of the Brexit transition.

    February 25, 2021 WebPage Regulatory News
    News

    FSB Sets Out Work Priorities for 2021

    In a recently published letter addressed to the G20 finance ministers and central bank governors, the FSB Chair Randal K. Quarles has set out the key FSB priorities for 2021.

    February 25, 2021 WebPage Regulatory News
    News

    EU Publishes Corrigendum to Revised Capital Requirements Regulation

    EU published, in the Official Journal of the European Union, a corrigendum to the revised Capital Requirements Regulation (CRR2 or Regulation 2019/876).

    February 25, 2021 WebPage Regulatory News
    News

    ESAs Issue Statement on Application of Sustainability Disclosures Rule

    ESAs published a joint supervisory statement on the effective and consistent application and on national supervision of the regulation on sustainability-related disclosures in the financial services sector (SFDR).

    February 25, 2021 WebPage Regulatory News
    News

    EC Consults on Crisis Management and Deposit Insurance Frameworks

    EC published a public consultation on the review of crisis management and deposit insurance frameworks in EU.

    February 25, 2021 WebPage Regulatory News
    News

    HKMA Enhances Loan Guarantee Scheme to Alleviate Pressure on SMEs

    HKMA announced that enhancements will be made to the Special 100% Loan Guarantee of the SME Financing Guarantee Scheme (SFGS) and the application period will be extended to December 31, 2021.

    February 24, 2021 WebPage Regulatory News
    News

    EBA Proposes Standards for Supervisory Cooperation Under IFD

    EBA launched consultations on the regulatory and implementing technical standards on cooperation and information exchange between competent authorities involved in prudential supervision of investment firms.

    February 24, 2021 WebPage Regulatory News
    News

    BoE Addresses Banks in Scope of First Resolvability Assessment

    BoE issued a letter to the CEOs of eight major UK banks that are in scope of the first Resolvability Assessment Framework (RAF) reporting and disclosure cycle.

    February 24, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 6629