APRA Finalizes Reporting Standards for Updated Basel Capital Framework
The Australian Prudential Regulation Authority (APRA) finalized the reporting standards to support the updated capital adequacy and credit risk capital requirements for authorized deposit-taking institutions. Also published were the non-confidential responses to the consultation on reporting standards and the draft taxonomy artefacts on capital adequacy for reporting standard ARS 112.0 on standardized approach to credit risk and ARS 113.0 on internal ratings-based approach to credit risk.
The final reporting standards will accompany the new bank capital framework, which is designed to embed unquestionably strong levels of capital and align Australian standards with the internationally agreed Basel III requirements. The final reporting standards include ARS 110.0 on capital adequacy, ARS 112.0 on standardized approach to credit risk, ARS 113.0 on internal ratings-based approach to credit risk, ARS 180.0 on counterparty credit risk, ARS 221.0 on large exposures, and ARS 223.0 on residential mortgage lending. APRA has made changes to these new collections to better meet data needs, simplify reporting requirements, and reduce the need for future data collections and ad hoc requests. Below are the highlights of the APRA letter on response to the consultation feedback:
- APRA is committed to meeting the January 01, 2023 implementation date to complete the prudential reforms and provide institutions with certainty for planning. To maximize the time available for entities development of reporting solutions, APRA is including a copy of the publicly visible taxonomy (PVT) with this response and will be making the collection available in the APRA Connect external test environment in early September. APRA will also hold information sessions to provide more information regarding the submission of returns.
- APRA made changes to ARS 112.0 and ARS 113.0. to clarify that reporting is expected at Level 1 and Level 2 and that exposures in New Zealand subsidiaries are not to be included.
- APRA made minor amendments to ARS 110.0 to better capture the quantum of exposures in New Zealand subsidiaries.
- A number of submissions had requested further information regarding the continuing requirement to report under the reporting standard ARS 118.1 (Other Off-balance Sheet Exposures), given that the content overlaps with that of the new ARS 112.0 and ARS 113.0. APRA can confirm that ARS 118.1 will be discontinued as part of the ARS 112.0 implementation.
- APRA clarified that it expects the first reporting for ARS 115.0 to be submitted 35 calendar days after March 31, 2023 and made minor modifications to ARS 113 to improve the ability to use data provided under this standard when comparing standardized and Internal Ratings-based Approach credit risk.
Another recent update from APRA involves publication of the frequently asked questions (FAQs) on Economic and Financial Statistics (EFS). The FAQs provide timely guidance on commonly asked questions about reporting and are designed to clarify reporting issues raised by authorized deposit-taking institutions and registered financial corporations.
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Keywords: Asia Pacific, Australia, Banking, Basel, Regulatory Capital, Credit Risk, Standardized Approach, IRB Approach, ARS 112, ARS 113, ARS 110, Large Exposures, Lending, Residential Mortgage, Reporting, APRA
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