Featured Product

    APRA Updates Regulatory Approach to Loan Deferrals Amid COVID Crisis

    July 09, 2020

    APRA updated the regulatory approach for loans subject to repayment deferrals amid the COVID-19 crisis. It announced an extension of its temporary capital treatment for bank loans with repayment deferrals and temporarily adjusted the capital treatment of loans where terms are modified or renegotiated. APRA also published a letter to the authorized deposit-taking institutions providing an update on the regulatory approach to loans subject to repayment deferrals. The letter advises institutions that this regulatory approach will be extended to cover a maximum period of 10 months from the start of a repayment deferral, or until March 31, 2021, whichever comes first. Additionally, APRA published aggregated data from the 20 largest deposit-taking institutions in Australia to provide more transparency on temporary loan repayment deferrals. APRA will continue to update this information on a monthly basis.

    Where an authorized deposit-taking institution restructures an affected borrower’s facilities before March 31, 2021 with a view to putting the borrower on a sustainable financial footing, the loan may continue to be regarded as a performing loan for capital and regulatory reporting purposes. For new loan repayment deferrals that authorized deposit-taking institutions provide for the first time after September 30, 2020, the temporary capital treatment may be applied until March 31, 2021. While authorized deposit-taking institutions are free to choose to extend repayment deferrals beyond these dates, they may not apply the temporary capital treatment after these dates. For repayment deferrals offered after September 30, 2020 (including extensions to existing deferral arrangements), the temporary capital treatment may only be applied where the authorized deposit-taking institution has undertaken an appropriate credit assessment of the borrower and is satisfied that the borrower has a reasonable prospect of being able to repay the loan (on original or restructured terms) when the repayment deferral period ends.

    APRA expects authorized deposit-taking institutions to have a comprehensive plan that demonstrates how they will systematically work through the large volume of impacted customers and avoid operational constraints as deferral periods come to an end. This plan should be approved by the relevant Accountable Person and provided to APRA and the Australian Securities and Investments Commission (ASIC) by the end of August 2020. To maintain transparency, APRA will also require authorized deposit-taking institutions to provide regular disclosures on the status of their deferred, restructured, and impaired loan portfolios. APRA also plans to develop additional reporting obligations in relation to these exposures, to monitor their volume and performance. Meanwhile, the Financial Instruments expected loss provisioning under AASB 9 continues to apply to authorized deposit-taking institutions, including for loans with repayment deferrals and restructured loans. Authorized deposit-taking institutions should continue to monitor borrowers closely and undertake regular credit risk assessments and should on a best endeavor basis continue to grade and re-rate borrowers through the period ahead.


    Related Links

    Keywords: Asia Pacific, Australia, Banking, COVID-19, Loan Moratorium, Credit Risk, Regulatory Capital, Basel, Reporting, Disclosures, AASB 9, ECL, APRA

    Featured Experts
    Related Articles

    UK Authorities Consult on Implementation of Basel 3.1 Standards

    The UK authorities have published consultations with respect to the Basel requirements for banks. The Prudential Regulation Authority (PRA) published the consultation paper CP16/22 on rules for the implementation of Basel 3.1 standards.

    November 30, 2022 WebPage Regulatory News

    ESAs Issue Multiple Regulatory Updates for Financial Sector Entities

    The three European Supervisory Authorities (ESAs) issued a letter to inform about delay in the Sustainable Finance Disclosure Regulation (SFDR) mandate, along with a Call for Evidence on greenwashing practices.

    November 15, 2022 WebPage Regulatory News

    FSB and NGFS Publish Initial Findings from Climate Scenario Analyses

    The Financial Stability Board (FSB) and the Network for Greening the Financial System (NGFS) published a joint report that outlines the initial findings from climate scenario analyses undertaken by financial authorities to assess climate-related financial risks.

    November 15, 2022 WebPage Regulatory News

    FSB Issues Reports on NBFI and Liquidity in Government Bonds

    The Financial Stability Board (FSB) published a letter intended for the G20 leaders, highlighting the work that it will undertake under the Indian G20 Presidency in 2023 to strengthen resilience of the financial system.

    November 14, 2022 WebPage Regulatory News

    ISSB Makes Announcements at COP27; IASB to Propose IFRS 9 Amendments

    The International Sustainability Standards Board (ISSB) of the IFRS Foundations made several announcements at COP27 and with respect to its work on the sustainability standards.

    November 10, 2022 WebPage Regulatory News

    IOSCO Prioritizes Green Disclosures, Greenwashing, and Carbon Markets

    The International Organization for Securities Commissions (IOSCO), at COP27, outlined the regulatory priorities for sustainability disclosures, mitigation of greenwashing, and promotion of integrity in carbon markets.

    November 09, 2022 WebPage Regulatory News

    EBA Finalizes Methodology for Stress Tests, Issues Other Updates

    The European Banking Authority (EBA) issued a statement in the context of COP27, clarified the operationalization of intermediate EU parent undertakings (IPUs) of third-country groups

    November 09, 2022 WebPage Regulatory News

    EU Finalizes Rules Under Crowdfunding Service Providers Regulation

    The European Union has finalized and published, in the Official Journal of the European Union, a set of 13 Delegated and Implementing Regulations applicable to the European crowdfunding service providers.

    November 08, 2022 WebPage Regulatory News

    OSFI Sets Out Work Priorities and Reporting Updates for Banks

    The Office of the Superintendent of Financial Institutions (OSFI) published an annual report on its activities, a report on forward-looking work.

    November 07, 2022 WebPage Regulatory News

    APRA Finalizes Changes to Capital Framework, Issues Other Updates

    The Australian Prudential Regulation Authority (APRA) finalized amendments to the capital framework, announced a review of the prudential framework for groups.

    November 03, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8597