APRA Issues Guide on Contingent Liquidity and FAQs on Operational Risk
The Australian Prudential Regulation Authority (APRA) published a new set of frequently asked questions (FAQs) on operational risk capital for authorized deposit-taking institutions. The FAQs provide information to assist regulated entities to interpret prudential and reporting standards (APS 115 and ARS 115.0) on standardized measurement approach to operational risk (APS 115). Additionally, APRA released a letter on its final guidance (APG 120) for locally incorporated authorized deposit-taking institutions subject to the liquidity coverage ratio (LCR) requirements to maintain contingent liquidity through self-securitized assets on an ongoing basis.
APRA had, in July 2021, advised its intention to de-link its guidance for self-securitized assets from the Committed Liquidity Facility (CLF) and released, for consultation, its proposed updated guidance. The proposed guidance stated that it would be prudent for a locally incorporated authorized deposit-taking institution subject to LCR requirements to hold self-securitized assets with a cash value equivalent to at least 30% of group net cash outflows as contingency for periods of stress. APRA received seven submissions that expressed support for the need to maintain contingent liquidity reserves for periods of stress. In response to the comments, APRA has amended the draft guidance as follows:
- For a locally incorporated authorized deposit-taking institutions subject to LCR requirements, it would be prudent to hold self-securitized assets with a cash value equivalent to at least 30% of AUD net cash outflows as contingency for periods of stress. APRA would expect the self-securitized assets to be unencumbered and not held as collateral for any other purpose.
- Using a twelve-month average of net cash outflows would reduce the volatility in the level of self-securitized assets that would be held.
APRA will replace APG 210 paragraph 67 with the above guidance and expects to release the updated version of APG 210 on March 01, 2022. APRA expects authorized deposit-taking institutions to report to the Reserve Bank of Australia, on an ongoing basis, the relevant data on the self-securitized assets held to meet the guidance. In addition, the APRA letter specifies that footnote 5 and Attachment B paragraph 5(e) of prudential standard on securitization (APS 120) outline when an authorized deposit-taking institution may repurchase exposures from a self-securitization. APRA will not take action under APS 120 as a result of authorized deposit-taking institutions reducing the size of their self-securitized assets in line with the final guidance. However, if an authorized deposit-taking institution is reducing the size of its self-securitized assets for other reasons, it should consult APRA.
Related Links
Keywords: Asia Pacific, Australia, Banking, FAQ, Operational Risk, Reporting, APG 210, APS 210, Liquidity Risk, LCR, Self-Securitized Assets, APRA
Featured Experts

Karen Moss
Senior practitioner in asset and liability management (ALM) and liquidity risk who assists banking clients in advancing their treasury and balance sheet management objectives
Previous Article
MAS Announces Multiple Initiatives During FinTech Festival in 2021Related Articles
EC Consults on PSD2 and Open Finance; EU Reaches Agreement on DORA
The European Commission (EC) published a public consultation on the review of revised payment services directive (PSD2) and open finance.
EC Mandates ESAs to Propose Amendments to SFDR Technical Standards
The European Commission (EC) has issued two letters mandating the European Supervisory Authorities (ESAs) to jointly propose amendments to the regulatory technical standards under Sustainable Finance Disclosure Regulation or SFDR.
EBA Examines Supervisory Practices, Issues Deposits Reporting Template
The European Banking Authority (EBA) published its annual report on convergence of supervisory practices for 2021. Additionally, following a request from the European Commission (EC),
US Agency Publications Address Basel, Reporting, and CECL Developments
The Farm Credit Administration published, in the Federal Register, the final rule on implementation of the Current Expected Credit Losses (CECL) methodology for allowances
SEC Extends Comment Period on Climate Risk Disclosures
The U.S. Securities and Exchange Commission (SEC) looks set to intensify focus on crypto-assets and cyber risk and extended the comment period on the proposed rules to enhance and standardize climate-related disclosures for investors.
APRA Reduces Committed Liquidity Facility, Issues Other Updates
The Australian Prudential Regulation Authority (APRA) announced reduction in the aggregate Committed Liquidity Facility and issued an update on the operational preparedness for zero and negative market interest rates.
CMF Consults on Basel Rules, Presents Roadmap to Address Climate Risks
The Commission for the Financial Market (CMF) in Chile published capital adequacy ratios (as of February 2022, January 2022, and December 2021) for 17 banks and for the banking system.
PRA Issues Statement on NPEs and Policy on Trading Activity Wind-Down
The Prudential Regulation Authority (PRA) issued a statement on the European Banking Authority (EBA) guidelines on management of non-performing exposures (NPEs) and forborne exposures.
EBA Updates Standards for 2023 Benchmarking of Internal Approaches
The European Banking Authority (EBA) updated the implementing technical standards that specify the data collection for the 2023 supervisory benchmarking exercise in relation to the internal approaches used in market risk, credit risk, and IFRS 9 accounting.
EIOPA Responds to Stakeholder Views on Blockchain in Insurance
The European Insurance and Occupational Pensions Authority (EIOPA) published a feedback statement on the responses received to the consultation on blockchain and smart contracts in insurance.