Featured Product

    APRA Specifies Regulatory Treatment of AASB 9 ECL Provisions

    July 04, 2017

    APRA issued a letter setting out its expectations on the regulatory treatment of AASB 9 expected credit loss (ECL) provisions and possible transition arrangements. All authorized deposit-taking institutions are required to apply AASB 9 Financial Instruments (AASB 9) for annual reporting periods beginning on or after January 01, 2018.

    BCBS had recently finalized an interim provisioning approach that retains the current regulatory treatment of accounting for ECL provisions. BCBS recommended that regulatory authorities should provide guidance, as appropriate, on how they intend to categorize ECL provisions as General Provisions or Specific Provisions in their jurisdiction. When applying the Prudential Standard APS 220 Credit Quality (APS 220) requirements (paragraphs 39, 42, 43, 46–49), APRA expects authorized deposit-taking institutions to adopt the following approach to the three AASB 9 provisioning stages:

    Stage 1 (representing 12-month ECL provisions on performing loans)—Allocate to General Reserve for Credit Losses (GRCL), if held against future, presently unidentified losses and, therefore, freely available to meet losses that subsequently materialize.

    Stage 2 (representing lifetime ECL provisions on underperforming loans)—Consider as Specific Provision for regulatory purposes. However, any portion that represents an amount for future, presently unidentified losses, would qualify as GRCL.

    Stage 3 (representing lifetime ECL provisions on nonperforming loans)—Consider as Specific Provision for regulatory purposes.

     

    The GRCL amount that may be included in tier 2 Capital, gross of tax effects, under the Prudential Standard APS 111 Capital Adequacy: Measurement of Capital (APS 111) (paragraph 32) remains unchanged. APRA already has adopted a GRCL concept in APS 220 that reflects a lifetime ECL concept within its prudential framework. APRA’s informal consultation has indicated that regulated entities will not need transitional arrangements. However, if entities believe that their capital position will be significantly affected, they should approach APRA for discussion on possible transition arrangements. APRA intends to update APS 220 in due course to reflect the appropriate treatment of provisions under AASB 9.

     

    Related Link: Letter on AASB 9 (PDF)

    Keywords: Asia Pacific, Australia, APRA, AASB 9, IFRS 9, ECL, APS 220

    Featured Experts
    Related Articles
    News

    MAS Concludes Blockchain Payments Prototype Shows Commercial Potential

    MAS and Temasek jointly released a report to mark the successful conclusion of the fifth and final phase of Project Ubin, which focused on building a blockchain-based multi-currency payments network prototype.

    July 13, 2020 WebPage Regulatory News
    News

    PRA Publishes Public Working Draft of XBRL Taxonomy 1.2.0 for Insurers

    PRA published a public working draft, or PWD, of version 1.2.0 of the BoE Insurance XBRL taxonomy, along with the related technical artefacts.

    July 13, 2020 WebPage Regulatory News
    News

    CPMI Report Sets Out Building Blocks to Enhance Cross-Border Payments

    CPMI published a report that sets out nineteen building blocks for a global roadmap to improve cross-border payments.

    July 13, 2020 WebPage Regulatory News
    News

    EBA Publishes Phase 2 of Technical Package on Reporting Framework 2.10

    EBA published phase 2 of the technical package on the reporting framework 2.10, providing the technical tools and specifications for implementation of EBA reporting requirements.

    July 10, 2020 WebPage Regulatory News
    News

    APRA Updates Reporting Validation Rules in July 2020

    APRA updated the lists of the Direct to APRA (D2A) validation rules for authorized deposit-taking institutions, insurers, and superannuation entities.

    July 10, 2020 WebPage Regulatory News
    News

    PRA to Partly Apply EBA Guidelines on Disclosures for COVID Measures

    PRA updated the statement that provides guidance to regulated firms on implementation of the EBA guidelines on reporting and disclosure of exposures subject to measures applied in response to the COVID-19 crisis.

    July 10, 2020 WebPage Regulatory News
    News

    EBA Updates List of Correlated Currencies Under CRR

    EBA updated the 2019 list of closely correlated currencies that was originally published in December 2013.

    July 10, 2020 WebPage Regulatory News
    News

    ESMA Guides on Securitization Repository Data Consistency Thresholds

    ESMA published the final report on the guidelines on securitization repository data completeness and consistency thresholds.

    July 10, 2020 WebPage Regulatory News
    News

    FASB Proposes to Delay Implementation of Insurance Contracts Standard

    FASB issued a proposed Accounting Standards Update that would grant insurance companies, adversely affected by the COVID-19 pandemic, an additional year to implement the Accounting Standards Update No. 2018-12 on targeted improvements to accounting for long-duration insurance contracts, or LDTI (Topic 944).

    July 09, 2020 WebPage Regulatory News
    News

    APRA Updates Regulatory Approach to Loan Deferrals Amid COVID Crisis

    APRA updated the regulatory approach for loans subject to repayment deferrals amid the COVID-19 crisis.

    July 09, 2020 WebPage Regulatory News
    RESULTS 1 - 10 OF 5480