The Australian Prudential Regulation Authority (APRA) finalized certain revisions to the credit risk management framework for authorized deposit-taking institutions. APRA has published a response to submissions on the interim version of ARS 220.0, the reporting standard on credit quality, in addition to the consequential changes to reporting standards affected by the implementation of APS 220, the reporting standard on credit risk management. In this context, the finalized reporting standards are ARS 220.0, ARS 743.0 on ABS/RBA Housing Finance, and ARS 199.0 for restricted authorized deposit-taking institutions. APRA will proceed with implementation of the interim ARS 220.0 commencing January 01, 2022. First submissions for the new reporting standard will be due on May 05, 2022.
APRA considers that the implementation of interim ARS 220.0 is required to ensure alignment of reporting with the revised APS 220 from January 2022, maintaining its value for supervision, publication, and use by other agencies. In addition, implementing the interim ARS 220.0 creates a smoother, staged transition to APS 220 and a more accurate base to evaluate the implementation of ARS 220.0 and APRA’s new capital framework. Under the new APS 220, the term impaired will be replaced with the term non-performing. During consultation, three submissions from authorized deposit-taking institutions expressed a preference for additional lead time to develop and implement the full ARS 220.0. Thus, APRA will continue to consult with institutions during development of the full ARS 220.0 data cube and will consider feedback on the indicative implementation dates. In addition, APRA has amended ARS 743.0 to update two references to impaired exposures and replace them with non-performing in response to consultation feedback. These changes, like the other consequential amendments, will apply from January 01, 2022. Finally, in ARS 199.0, APRA replaced references to the word "impaired" with "non-performing" for the reporting form ARF 199.0 and modified instructions for this reporting form.
Keywords: Asia Pacific, Australia, Banking, Credit Risk, ARS 220, APS 220, Reporting, Credit Exposures, NPLs, APRA
Scott is a Director in the Regulatory and Accounting Solutions team responsible for providing accounting expertise across solutions, products, and services offered by Moody’s Analytics in the US. He has over 15 years of experience leading auditing, consulting and accounting policy initiatives for financial institutions.
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