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    APRA Issues Policy and Supervisory Priorities for 2023 and Beyond

    February 02, 2023

    The Australian Prudential Regulation Authority (APRA) set out the work priorities for 2023 and beyond, issued the updated Direct to APRA validation and derivation rules for reporting, granted licenses to banking entities, set the countercyclical capital buffer (CCyB), and provided an update on the Committed Liquidity Facility.

    Policy and Supervision Priorities for 2023

    The following are the key policy priorities outlined by APRA in this communication: 

    • Finalization of the revised prudential standard on the Interest Rate Risk in the Banking Book (APS 117) in the second quarter of 2023 and release of a prudential practice guide for consultation, with the standard expected to be effective from January 01, 2025, followed by the review of the market risk standards
    • Consultation on the revision to the Prudential Standard on Market Risk (APS 116) and the Prudential Standard on Counterparty Credit Risk (APS 180) in 2024, with the delayed effective dates in 2026
    • Consultation on the prudential treatment for crypto-assets in 2024, which is expected to come into effect in 2025
    • Commencement of the review of the Prudential Standard on Liquidity (APS 210) in 2023, with the release of a discussion paper in the latter half of the year, expected to finalize any changes to the standard in 2024, to be effective in 2025
    • Review of the Prudential Standard on Financial Claims Scheme (APS 910), considering the past domestic and international developments, expected to consult on any potential changes to APS 910 in 2024
    • Finalization of the Prudential Standard on Resolution Planning (CPS 900) in the first half of 2023, together with guidance on recovery and resolution planning (CPG 190 and CPG 900), with the standards to be effective from January 01, 2024
    • Finalization of the Prudential Standard on Operational Risk Management (CPS 230) and consultation on the associated guidance in the first half of 2023, with the standard expected to be effective from 2024
    • Supervision work on the review of the prudential framework for "groups" of entities, with a discussion paper expected  2023, to seek feedback on the five key topics on groups—that is, financial resilience, governance, risk management, resolution, and competition issues
    • Updation of the guidelines for licensing new authorized non-operating holding companies, with a consultation expected in 2024 and to be effective from 2025 onward
    • Consultation on standards on governance (CPS 510) and broader governance requirements in the latter half of 2023, with the expected changes to be finalized in 2024. 
    • Updation of the Prudential Standard on Fit and Proper (CPS 520) as part of the review program, following the finalization of the Financial Accountability Regime; APRA to also sequence review of the Prudential Standard on Risk Management (CPS 220)

    Apart from the above-mentioned key policy priorities, APRA also outlined its supervision priorities for 2023. The following are the key supervision priorities outlined by APRA:

    • Implementation of the Prudential Standard on Operational Risk Management (CPS 230), expected to be effective from January 01, 2024
    • Embedding the new capital framework to be a major focus with the introduction of additional regulatory buffers and adjusted risk weights, which will be reflected in new reporting from March  31, 2023
    • Review work on the banks’ issuance planning and the liquidity stress testing of large and mid-tier authorized deposit-taking institutions in 2023
    • Review work on the problem of asset management and credit portfolio management of the authorized deposit-taking institutions in the first half of 2023, with the assessment of Internal Ratings Based (IRB) model performance in the second half of 2023
    • Improvement in cyber supervision plans with the assessments of entities’ compliance with Prudential Standard on Information Security (CPS 234)
    • Continuation of crisis-response work in 2023 with large authorized deposit-taking institutions to develop enhanced crisis response plans for cyber risk to the payments system
    • Continuation on engagement with entities to ensure that any new business models and practice changes, such as banking-as-a-service, new product development, strategic partnerships, and structural changes, accommodate non-banking businesses.

    Other Updates

    As part of the other announcements: APRA:

    • Granted licenses to ANZ Group Holdings Limited to operate as a non-operating holding company of an authorized deposit-taking institution and to Alex Bank Pty Limited to operate as an authorized deposit-taking institution without restrictions.

    • Confirmed the countercyclical capital buffer (CCyB) to be set at a new default rate of 1% of risk-weighted assets (RWA) from January 01, 2023.
    • Issued a letter to all locally incorporated authorized deposit-taking institutions to confirm that the aggregate Committed Liquidity Facility (CLF) has been fully phased-out to zero. The CLF was introduced to the Liquidity Coverage Ratio framework in response to the relatively low levels of government debt on issue. However, use of the CLF is no longer required as there is deemed to be sufficient high-quality liquid assets (HQLA) for locally incorporated institutions to meet LCR requirements.


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    Keywords: Derivation Rules, D2A, Liquidity Coverage Ratio, Australia, Validation Rules, CCyB, Asia Pacific, Banking, Reporting, Policy, Basel, APRA, Liquidity Risk

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