APRA is introducing minor changes to the large exposures framework for authorized deposit-taking institutions. Along with the amendments to prudential (APS 221) and reporting (ARS 221.0) standards on large exposures, APRA is releasing a second set of frequently asked questions (FAQ) to help institutions implement this framework. The large exposures framework sets out prudential and reporting requirements for authorized deposit-taking institutions with respect to their large exposures and risk concentrations. The revised standards will apply from January 01, 2020, with most aspects having come into effect on January 01, 2019.
The key changes to the large exposures framework include extending the exemption for connecting counterparties involving government-related entities to economic interdependence relationships as well as control relationships, removing references to transition arrangements allowed until December 31, 2019, and updating references and website links. These revisions to APS 221 and ARS 221.0 will ensure the standards are up-to-date when they are fully in force. The second set of FAQ, which have been released with these revised versions, cover requirements for collateral exposures, the treatment of government and government-related exposures, connected counterparties, and reporting of large exposures.
ARS 221.0 sets out the requirements for the provision of information on large exposures of an authorized deposit-taking institution. It includes the Reporting Form ARF 221.0 Large Exposures and Reporting Form ARF 221.1 Large Exposures (for foreign foreign deposit-taking institutions) and associated specific instructions. ARS 221.0 must be read in conjunction with the prudential standard APS 221. APS 221 requires authorized deposit-taking institutions to implement prudent measures and to set prudent limits to monitor and control their large exposures and risk concentrations. The key requirements of APS 221 are that an authorized deposit-taking institution must:
- Have a Board-approved policy that governs its large exposures and risk concentrations
- Have adequate systems and controls to identify, measure, monitor and report large exposures and risk concentrations
- Identify connected counterparties
- Ensure its large exposures meet the large exposure limits
- Measure exposure values for large exposure purposes using specified treatments
Effective Date: January 01, 2020
Keywords: Asia Pacific, Australia, Banking, Large Exposures, APS 221, ARS 221, FAQ, Concentration Risk, Credit Risk, Basel III, Reporting, APRA
Previous ArticleEU Reaches Political Agreement on Sustainable Investment Taxonomy
The European Commission (EC) published the Delegated Regulation 2022/786 with regard to the liquidity coverage requirements for credit institutions under the Capital Requirements Regulation (CRR).
The European Banking Authority (EBA) published the final draft regulatory technical standards specifying the criteria to identify shadow banking entities for the purposes of reporting large exposures.
The European Insurance and Occupational Pensions Authority (EIOPA) published a report assessing insurers' exposure to physical climate change risks
The European Commission (EC) published the results of a public consultation, held in October 2021, on the review of the Web Accessibility Directive.
The Network for Greening the Financial System (NGFS) published two reports to aid central banks and regulators in their oversight of the financial sector and in their central bank operations
The Monetary Authority of Singapore (MAS) and the SC-STS are jointly consulting, until June 10, 2022, on setting adjustment spreads for the conversion of legacy SOR contracts to SORA reference rate.
The Office of the Superintendent of Financial Institutions (OSFI) published the strategic plan for 2022-2025 and the departmental plan for 2022-23.
The European Banking Authority (EBA) is consulting, until August 31, 2022, on the draft implementing technical standards specifying requirements for the information that sellers of non-performing loans (NPLs) shall provide to prospective buyers.
The European Council and the Parliament reached an agreement on the revised Directive on security of network and information systems (NIS2 Directive).
The European Banking Authority (EBA) published the final draft regulatory technical standards specifying information that crowdfunding service providers shall provide to investors on the calculation of credit scores and prices of crowdfunding offers.