APRA Explains Capital Treatment of a COVID Loan Scheme for Banks
APRA published a new frequently asked question (FAQ) for authorized deposit-taking institutions on the credit risk capital treatment of loans covered by the Coronavirus Australian Government Small and Medium Enterprise (SME) Guarantee Scheme. The Coronavirus SME Guarantee Scheme (both phases), established by the Commonwealth Government may be regarded as an eligible guarantee by the Australian Government for risk-weighting purposes.
For both secured and unsecured lending, the uncovered portion of the exposure must be risk-weighted according to the risk-weight applicable to the original counterparty. In relation to the covered portion of the exposure:
- Authorized deposit-taking institutions utilizing the standardized approach may apply a risk-weight appropriate to the government in accordance with APS 112 on Standardized Approach to Credit Risk
- Authorized deposit-taking institutions utilizing the internal-ratings bases (IRB) approach may apply a risk-weight derived by using the relevant substitution approach in accordance with the requirements specified in APS 113 on IRB approach to credit risk
Related Links
Keywords: Asia Pacific, Australia, Banking, COVID-19, Credit Risk, FAQ, Basel, Regulatory Capital, APS 112, APS 113, Loan Guarantee, IRB Approach, Standardized Approach, APRA
Featured Experts

María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer

Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.

Victor Calanog, Ph.D.
Leading economist; commercial real estate; performance forecasting, econometric infrastructure; data modeling; credit risk modeling; portfolio assessment; custom commercial real estate analysis; thought leader.
Related Articles
EBA Clarifies Use of COVID-19-Impacted Data for IRB Credit Risk Models
The European Banking Authority (EBA) published four draft principles to support supervisory efforts in assessing the representativeness of COVID-19-impacted data for banks using the internal ratings based (IRB) credit risk models.
EP Reaches Agreement on Corporate Sustainability Reporting Directive
The European Council and the European Parliament (EP) reached a provisional political agreement on the Corporate Sustainability Reporting Directive (CSRD).
PRA Consults on Model Risk Management Principles for Banks
The Prudential Regulation Authority (PRA) launched a consultation (CP6/22) that sets out proposal for a new Supervisory Statement on expectations for management of model risk by banks.
EC Regulation Amends Standards for Calculating Credit Risk Adjustments
The European Commission (EC) published the Delegated Regulation 2022/954, which amends regulatory technical standards on specification of the calculation of specific and general credit risk adjustments.
BIS Hub Updates Work Program for 2022, Announces New Projects
The Bank for International Settlements (BIS) Innovation Hub updated its work program, announcing a set of projects across various centers.
EIOPA Issues Cyber Underwriting Proposal, Statement on Open Insurance
The European Insurance and Occupational Pensions Authority (EIOPA) published two consultation papers—one on the supervisory statement on exclusions related to systemic events and the other on the supervisory statement on the management of non-affirmative cyber exposures.
US Senate Members Seek Details on SEC Proposed Climate Disclosure Rule
Certain members of the U.S. Senate Committee on Banking, Housing, and Urban Affairs issued a letter to the Securities and Exchange Commission (SEC)
EIOPA Consults on Review of Securitization Framework in Solvency II
The European Insurance and Occupational Pensions Authority (EIOPA) published a consultation paper on the advice on the review of the securitization prudential framework in Solvency II.
UK Authorities Issue Regulatory and Reporting Updates for Banks
The Prudential Regulation Authority (PRA) issued a statement on PRA buffer adjustment while the Bank of England (BoE) published a notice on the statistical reporting requirements for banks.
BCBS Issues Climate Risk Principles while HKMA Expresses Its Support
The Basel Committee on Banking Supervision (BCBS) issued principles for the effective management and supervision of climate-related financial risks.