The Australian Prudential Regulation Authority (APRA) is further extending support for loan repayment deferrals amid pandemic. This announcement largely mirrors the temporary support measures APRA had announced in March 2020. which ended on March 31, 2021. APRA plans to release an updated prudential standard in July 2021 to formalize this new treatment, in line with the approach taken in 2020. This treatment will be formalized as part of the Attachment E (COVID-19 Adjustments) to APS 220, the prudential standard on credit quality, and ARS 923.2, the reporting standard on repayment deferrals.
A number of authorized deposit-taking institutions have announced COVID-19 support packages that will provide the affected small business and home loan customers with an option to defer their loan repayments. In response, APRA is providing regulatory relief to assist authorized deposit-taking institutions in supporting their customers through this period. Eligible borrowers include where the authorized deposit-taking institution reasonably believes that the borrower’s ability to repay according to the original loan terms has been, or is likely to be, affected by the COVID-19 pandemic and the loan was not 90 days past-due or impaired at the time a repayment deferral or restructure was provided to the borrower. For eligible borrowers, authorized deposit-taking institutions will not need to treat the period of deferral as a period of arrears or a loan restructuring. This will apply to loans that are granted a repayment deferral of up to three months before the end of August 2021. This will provide banks and borrowers with additional flexibility to manage the period ahead. The measures apply regardless of whether or not the borrower has previously been granted a repayment deferral due to the impact of the pandemic. For transparency, APRA will require authorized deposit-taking institutions to publicly disclose and report the nature and terms of any repayment deferrals and the volume of loans. Nonetheless, authorized deposit-taking institutions must continue to provision for these loans under the relevant accounting standards.
Related Link: Press Release
Keywords: Asia Pacific, Australia, Banking, COVID-19, Credit Risk, Loan Moratorium, Payment Deferrals, APS 220, ARS 923.2, Lending, APRA
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