APRA Consults on ARS 720.1, Finalizes Licensing Approach
The Australian Prudential Regulation Authority (APRA), the Australian Bureau of Statistics (ABS) and the Reserve Bank of Australia (RBA) issued a letter to consult on changes to ARS 720.1, the reporting standard on ABS/RBA loans and finance leases. APRA proposed to amend ARS 720.1 to accurately align with the latest version of APS 220, the prudential standard on credit risk management that was published in December 2019. The comment period for this consultation ends on September 07, 2021 and the changes are proposed to be effective from January 01, 2022. Thus, APRA will delay implementing the November 2020 updates to ARS 720.1 until this time. In addition, APRA finalized the revised approach to licensing and supervising new authorized deposit-taking institutions, thus publishing the response paper on the proposed approach, the final information paper, and two guidelines on licensing for locally incorporated institutions and overseas banks.
The revised approach to licensing follows a review of the existing licensing regime for the authorized deposit-taking institutions and aims to incorporate lessons learned since the launch of the restricted institution licensing pathway in 2018. Post consultation, the final position of APRA remains largely consistent with its original proposals, with the most significant clarifications relating to milestones in the progression of a license application. Under the finalized approach:
- Restricted institutions must achieve a limited launch of both an income-generating asset product and a deposit product before being granted a license.
- There is increased clarity about capital requirements at different stages for new entrants, aimed at reducing volatility in capital levels and facilitating a transition to the methodology for established authorized deposit taking institutions over time.
- New entrants are expected to have a more advanced contingency plan to respond to financial stress, including an option to execute the authorized deposit taking institution's orderly and solvent exit from banking business.
The new approach comes into effect immediately, although much of the information package is simply a formalization of existing practice. APRA also published guidelines on licensing for locally incorporated institutions and overseas banks. These guidelines are intended to assist entities in navigating the licensing process. The guidelines outline the licensing process, the type of support and guidance applicants can expect to receive from APRA, the minimum criteria to be addressed by applicants under the restricted and direct licensing pathways, and the minimum supporting information APRA expects with applications, for applicants to demonstrate they have met the relevant prudential requirements to be granted a license.
Related Links
- Press Release on ARS 720.1
- Consultation Letter on ARS 720.1
- Draft ARS 720.1 (PDF)
- Press Release on Licensing
- Response Paper (PDF)
- Information Paper for New Entrants (PDF)
- Guidelines for Locally Incorporated Institutions (PDF)
- Guidelines for Overseas Banks (PDF)
Comment Due Date: September 07, 2021
Keywords: Asia Pacific, Australia, Banking, ARD 720.1, APS 220, Credit Risk, Licensing Regime, Reporting, EFS, Data Collection, 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.
David Fihrer
Skilled life insurance actuary; subject matter expert on IFRS 17 and source of earnings
Previous Article
FI Updates Reporting Documentation for Banks and Investment FirmsRelated Articles
BIS Paper Studies Impact of Fintech Lending on Small Businesses in US
The Bank for International Settlements (BIS) published a paper that studies impact of fintech lending on credit access for small businesses in U.S.
UK Regulators Issue CRR Changes and Stress Test Scenarios for Banks
The Prudential Regulation Authority (PRA) issued the policy statement PS8/22 to amend the Own Funds and Eligible Liabilities (CRR) Part of the PRA Rulebook and update the supervisory statement SS7/13 titled "Definition of capital (CRR firms).
EBA Launches EU-Wide Transparency Exercise in 2022
The European Banking Authority (EBA) launched the EU-wide transparency exercise for 2022, with results of the exercise expected to be published at the beginning of December, along with the annual Risk Assessment Report.
SRB on CRR Quick-Fix to Policy for Multiple Point of Entry Banks
The Single Resolution Board (SRB) welcomed the adoption of the review of the Capital Requirements Regulation, or CRR, also known as the "CRR quick-fix."
EC Rule Lists Advanced Economies for Market Risk Capital Calculations
The European Commission (EC) recently adopted the Delegated Regulation 2022/1622, which sets out the regulatory technical standards to specify the countries that constitute advanced economies for the purpose of specifying risk-weights for the sensitivities to equity.
EBA Publishes Final Regulatory Standards on STS Securitizations
The European Banking Authority (EBA) published the final draft regulatory technical standards specifying and, where relevant, calibrating the minimum performance-related triggers for simple.
ECB Further Reviews Costs and Benefits Associated with IReF
The European Central Bank (ECB) is undertaking the integrated reporting framework (IReF) project to integrate statistical requirements for banks into a standardized reporting framework that would be applicable across the euro area and adopted by authorities in other EU member states.
EBA Publishes Funding Plans Report, Receives EMAS Certification
The European Banking Authority (EBA) has been awarded the top European Standard for its environmental performance under the European Eco-Management and Audit Scheme (EMAS).
MAS Launches SaaS Solution to Simplify Listed Entity ESG Disclosures
The Monetary Authority of Singapore (MAS) set out the Financial Services Industry Transformation Map 2025 and, in collaboration with the SGX Group, launched ESGenome.
BCBS to Finalize Crypto Rules by End-2022; US to Propose Basel 3 Rules
The Basel Committee on Banking Supervision met, shortly after a gathering of the Group of Central Bank Governors and Heads of Supervision (GHOS), the oversight body of BCBS.
