Featured Product

    APRA Issues Operational Risk Rules, Consults on Reporting Requirements

    December 11, 2019

    APRA published an updated prudential standard APS 115 that sets out operational risk requirements for authorized deposit-taking institutions in Australia. In a letter to authorized deposit-taking institutions, APRA also outlined its response to submissions on the proposed changes to APS 115, which addresses the standardized measurement approach to operational risk and comes into effect from January 01, 2021. In addition to the final APS 115, APRA released, for consultation, the draft reporting standard ARS 115.0 on standardized measurement approach to operational risk. The consultation period on ARS 115.0 ends on February 21, 2020. ARS 115.0 will commence on January 01, 2021 for Advanced Measurement Approaches (AMA) authorized deposit-taking institutions and on January 01, 2022 for all other authorized deposit-taking institutions.

    APS 115 requires an authorized deposit-taking institution to hold sufficient regulatory capital against its operational risk exposures. The key requirement of this prudential standard is that an authorized deposit-taking institution that is not subject to the simplified framework must calculate its capital requirement for operational risk based on its business indicator, which is a financial-statement-based proxy of its operational risk exposure. This prudential standard applies to authorized deposit-taking institutions, except: (a) foreign authorized deposit-taking institutions; purchased payment facility providers (PPF providers); and authorized deposit-taking institutions that satisfy the eligibility criteria for the simplified framework. An institution must calculate its operational risk capital charge as 12% of its business indicator (BI), plus:

    (a) if the BI exceeds $1.5 billion, then 3% of the amount by which the BI exceeds $1.5 billion, plus

    (b) if the BI exceeds $45 billion, then 3% of the amount by which the BI exceeds $45 billion.

    The consultation on the APS 115 had resulted in six submissions with comments on the operational risk proposals set out in the June response to submissions paper and the draft APS 115. Respondents were supportive of the proposed approach to the determination of capital to be held for operational risk purposes. However, a number of submissions commented on the intention of APRA to issue a new prudential standard covering qualitative operational risk matters. Submissions argued that the absence of information on the content of the future standard creates uncertainty for authorized deposit-taking institutions, given that it is not clear how a qualitative standard will interact with APS 115 and the implementation of that standard. APRA is informing that its qualitative operational risk requirements are still undergoing development and, while the final draft content is yet to be settled, the new standard will not have implications for when and how authorized deposit-taking institutions implement and comply with the new APS 115.

    The proposed ARS 115.0 has been designed to be aligned with relevant accounting standards. In most cases, entities will only be required to enter information for the current period, the system will automatically retrieve historic data points and include them in the form. Adjustment fields have been included to take account of events such as divestments and mergers. Authorized deposit-taking institutions will be required to submit the required data for historical periods in the first collection. This data will be used solely for calculating the first period’s capital requirement. The proposed implementation of ARS 115.0 is expected to coincide with the start of the new data collection solution (DCS), which replaces Direct to APRA (D2A), the current data collection tool of APRA. APRA intends for entities to submit ARS 115.0 data in the new DCS and expects that authorized deposit-taking institutions will be able to submit data via manual entry, upload of XBRL, or Microsoft Excel files.

     

    Related Links

    Comment Due Date: February 21, 2020 (ARS)

    Effective Date: January 01, 2021/January 01, 2022 (APS)

    Keywords: Asia Pacific, Australia, Banking, Operational Risk, Basel III, Regulatory Capital, Reporting, APS 115, ARS 115, Business Indicator, APRA

    Featured Experts
    Related Articles
    News

    EU Amends CRD4 and CRD5 as Part of Capital Markets Recovery Package

    EU published Directive 2021/338, which amends the Markets in Financial Instruments Directive (MiFID) II and the Capital Requirements Directives (CRD 4 and 5) to facilitate recovery from the COVID-19 crisis.

    February 26, 2021 WebPage Regulatory News
    News

    EU Committee Recommends Systemic Risk Buffer of 4.5% in Norway

    The Standing Committee of the European Free Trade Association (EFTA) recommended that a systemic risk buffer level of 4.5% for domestic exposures can be considered appropriate for addressing the identified systemic risks to the stability of the financial system in Norway.

    February 25, 2021 WebPage Regulatory News
    News

    PRA Clarifies Approach to Onshoring of Credit Risk Rules for UK Banks

    In a recent statement, PRA clarified its approach to the application of certain EU regulatory technical standards and EBA guidelines on standardized and internal ratings-based approaches to credit risk, following the end of the Brexit transition.

    February 25, 2021 WebPage Regulatory News
    News

    FSB Sets Out Work Priorities for 2021

    In a recently published letter addressed to the G20 finance ministers and central bank governors, the FSB Chair Randal K. Quarles has set out the key FSB priorities for 2021.

    February 25, 2021 WebPage Regulatory News
    News

    EU Publishes Corrigendum to Revised Capital Requirements Regulation

    EU published, in the Official Journal of the European Union, a corrigendum to the revised Capital Requirements Regulation (CRR2 or Regulation 2019/876).

    February 25, 2021 WebPage Regulatory News
    News

    ESAs Issue Statement on Application of Sustainability Disclosures Rule

    ESAs published a joint supervisory statement on the effective and consistent application and on national supervision of the regulation on sustainability-related disclosures in the financial services sector (SFDR).

    February 25, 2021 WebPage Regulatory News
    News

    EC Consults on Crisis Management and Deposit Insurance Frameworks

    EC published a public consultation on the review of crisis management and deposit insurance frameworks in EU.

    February 25, 2021 WebPage Regulatory News
    News

    HKMA Enhances Loan Guarantee Scheme to Alleviate Pressure on SMEs

    HKMA announced that enhancements will be made to the Special 100% Loan Guarantee of the SME Financing Guarantee Scheme (SFGS) and the application period will be extended to December 31, 2021.

    February 24, 2021 WebPage Regulatory News
    News

    EBA Proposes Standards for Supervisory Cooperation Under IFD

    EBA launched consultations on the regulatory and implementing technical standards on cooperation and information exchange between competent authorities involved in prudential supervision of investment firms.

    February 24, 2021 WebPage Regulatory News
    News

    BoE Addresses Banks in Scope of First Resolvability Assessment

    BoE issued a letter to the CEOs of eight major UK banks that are in scope of the first Resolvability Assessment Framework (RAF) reporting and disclosure cycle.

    February 24, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 6629