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    APRA Consults on Standard for Reporting of COVID-19 Loans

    August 13, 2020

    APRA issued a letter to authorized deposit-taking institutions announcing its intent to formalize the capital measures and reporting requirements for COVID-19 loans through temporary legislative instruments. To this end, APRA is consulting on the draft Attachment E to APS 220, which is the prudential standard on credit quality, and on the new draft reporting standard ARS 923.2 on repayment deferrals. Through ARS 923.2, APRA intends to collect and publish entity-level data on COVID-19 impacted loans. The consultation period for these prudential and reporting standards ends on August 21, 2020. APRA also incorporated these developments into the frequently asked questions (FAQs) on the treatment of COVID-19 loans. Aligned with the APRA approach, the Australian Securities and Investments Commission (ASIC) will soon publish guidance on its expectations of retail lenders for when loan repayment deferrals end.

    In Attachment E to APS 220, the main adjustments to the capital treatment cover loans offered temporary repayment deferrals and loans that have been restructured to return to a regular repayment schedule. For repayment deferrals offered after September 30, 2020 (including extensions to existing deferral arrangements), the temporary capital treatment may only be applied where the deposit-taking institution is satisfied that the borrower has a reasonable prospect of being able to repay the loan (on original or restructured terms) when the repayment deferral period ends. Notwithstanding any other requirements in this prudential standard, a COVID-19 loan, as defined below, is subject to the provisions in this Attachment for the period of March 23, 2020 to March 31, 2021. A COVID-19 loan refers to a credit exposure that meets all of the following criteria:

    • The loan is provided to an eligible borrower. An eligible borrower for this purpose is either a natural person or a small- to medium-size enterprise (SME) with less than $10 million in total debt facilities outstanding.
    • The borrower’s ability to repay according to the original loan terms has been affected by the COVID-19 pandemic.
    • The loan was not 90 days past-due or impaired at the time a loan deferral or restructure was provided to the borrower.

    The reporting standard ARS 923.2 outlines the requirements for provision of information to APRA. This reporting standard applies to all authorized deposit-taking institutions  for reporting periods ending on or after June 30, 2020. The information required by this reporting standard must be provided by an authorized deposit-taking institution to which this reporting standard applies in respect of each calendar month. Information required to be provided for the June and July 2020 reporting periods may be provided to APRA at any time before September 02, 2020. APRA may change the reporting periods, or specified reporting periods, for a particular institution, to require it to provide the information required by this reporting standard more frequently, or less frequently, having regard to the particular circumstances of the institutions and the requirements of the Commonwealth Government of Australia. APRA may also grant an institution an extension of a due date, in writing, in which case the new due date for the provision of the information will be the date on the notice of extension. 

    Earlier, APRA had announced that it intends to publish the entity-level data on COVID-19 impacted loans, collected through the new reporting standard ARS 923.2. The first publication of ARS 932.2 data is expected to be in early September 2020. This publication will cover COVID-19 impacted loans, for individual authorized deposit-taking institutions, as at June 30, 2020 and July 31, 2020. The APRA publications are not a substitute for appropriate disclosure by individual institutions. Going forward, APRA expects that authorized deposit-taking institutions will provide the relevant data within 10 business days after the end of the reporting period to which the information relates. APRA then intends to publish the data by the end of the following month to which the information relates. 

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    Comment Due Date: August 21, 2020

    Keywords: Asia Pacific, Australia, Banking, COVID-19, Credit Risk, Loan Moratorium, Regulatory Capital, Reporting, Basel, APS 220, ARS 923.2, FAQ, Payment Deferrals, APRA
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