Featured Product

    APRA Revises Related Entities Standard for Banks

    August 20, 2019

    APRA published a strengthened prudential standard APS 222 on associations with related entities, with the aim to mitigate contagion risk within banking groups. The revised version of the reporting standard on exposures to related entities (ARS 222.0) and the new reporting standard on exposures to related entities for step-in risk (ARS 222.2) were also published. APRA had launched a consultation for the revision of APS 222 and ARS 222 in July 2018 and has now published its response to the submissions received on this consultation. The revised APS 222 will come into effect from January 01, 2021.

    The objective of APS 222 is that authorized deposit-taking institutions identify, monitor, and control contagion risks arising from their associations and dealings with related entities and those creating step-in risk. APS 222 applies to all authorized deposit-taking institutions, on a level 1 basis, except purchased payment facility providers. APRA had received submissions from 10 stakeholders to the July 2018 consultation. Most responses supported updating the requirements while some raised concerns about the complexity of implementing certain proposed changes. APRA has made a number of adjustments to the proposals to address many of these concerns and has maintained other aspects of the original proposals where it has concluded these are warranted based on prudential considerations. The changes in APS 222 aim to update and streamline requirements to account for lessons learned from the global financial crisis on mitigating the flow of contagion risk to an authorized deposit-taking institution, particularly from related entities. The changes also aim to ensure general alignment with the revised authorized deposit-taking institution large exposures framework, which came into effect on January 01, 2019. APS 222 will be updated to include:

    • Broader definition of related entities that includes board directors and substantial shareholders
    • Revised limits on the extent to which authorized deposit-taking institutions can be exposed to related entities
    • Minimum requirements for authorized deposit-taking institutions to assess contagion risk
    • Removing the eligibility of authorized deposit-taking institutions' overseas subsidiaries to be regulated under APRA’s Extended Licensed Entity framework

    The accompanying reporting standard ARS 222 sets out requirements for the provision of information to APRA related to an authorized deposit-taking institution’s exposures to related entities. It includes reporting forms ARF 222.0 (Exposures to related entities) and ARF 222.1 (Exposures to related entities – foreign ADI), along with the associated specific instructions. ARS 222.2 sets out requirements for the provision of information to APRA related to an authorized deposit-taking institution’s exposures to step-in risk entities. APRA will require authorized deposit-taking institutions to regularly assess and report on their exposure to step-in risk, which is the likelihood that they may need to “step in” to support an entity to which they are not directly related. ARS 222 and ARS 222.0 apply to reporting periods ending on or after January 01, 2021.


    Related Links

    Effective Date: January 01, 2021

    Keywords: Asia Pacific, Australia, Banking, Related Parties Framework, APS 222, ARS 222, Reporting, ARF 222, Contagion Risk, APRA

    Featured Experts
    Related Articles

    US Regulators Release Stress Test Scenarios for Banks

    The U.S. regulators recently released baseline and severely adverse scenarios, along with other details, for stress testing the banks in 2024. The relevant U.S. banking regulators are the Federal Reserve Bank (FED), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).

    February 28, 2024 WebPage Regulatory News

    Asian Governments Aim for Interoperability in AI Governance Frameworks

    The regulatory landscape for artificial intelligence (AI), including the generative kind, is evolving rapidly, with governments and regulators aiming to address the challenges and opportunities presented by this transformative technology.

    February 28, 2024 WebPage Regulatory News

    EBA Proposes Operational Risk Standards Under Final Basel III Package

    The European Union (EU) has been working on the final elements of Basel III standards, with endorsement of the Banking Package and the publication of the European Banking Authority (EBA) roadmap on Basel III implementation in December 2023.

    February 26, 2024 WebPage Regulatory News

    EFRAG Proposes XBRL Taxonomy and Standard for Listed SMEs Under ESRS

    The European Financial Reporting Advisory Group (EFRAG), which plays a crucial role in shaping corporate reporting standards in European Union (EU), is seeking comments, until May 21, 2024, on the Exposure Draft ESRS for listed SMEs.

    February 23, 2024 WebPage Regulatory News

    ECB to Expand Climate Change Work in 2024-2025

    Banking regulators worldwide are increasingly focusing on addressing, monitoring, and supervising the institutions' exposure to climate and environmental risks.

    February 23, 2024 WebPage Regulatory News

    BIS Bulletin Examines Cognitive Limits of Large Language Models

    The use cases of generative AI in the banking sector are evolving fast, with many institutions adopting the technology to enhance customer service and operational efficiency.

    January 25, 2024 WebPage Regulatory News

    ECB is Conducting First Cyber Risk Stress Test for Banks

    As part of the increasing regulatory focus on operational resilience, cyber risk stress testing is also becoming a crucial aspect of ensuring bank resilience in the face of cyber threats.

    January 24, 2024 WebPage Regulatory News

    EBA Continues Momentum Toward Strengthening Prudential Rules for Banks

    A few years down the road from the last global financial crisis, regulators are still issuing rules and monitoring banks to ensure that they comply with the regulations.

    January 24, 2024 WebPage Regulatory News

    EU and UK Agencies Issue Updates on Final Basel III Rules

    The European Commission (EC) recently issued an update informing that the European Council and the Parliament have endorsed the Banking Package implementing the final elements of Basel III standards

    December 19, 2023 WebPage Regulatory News

    Industry Agency Expects Considerable Uptake for Swiss Climate Scores

    The Swiss Federal Council recently decided to further develop the Swiss Climate Scores, which it had first launched in June 2022.

    December 18, 2023 WebPage Regulatory News
    RESULTS 1 - 10 OF 8952