Featured Product

    APRA Issues Update on Capital Reform Policy Settings for Banks

    July 21, 2021

    The Australian Prudential Regulation Authority (APRA) released a letter to authorized deposit-taking institutions to provide an update on key policy settings for the capital framework reforms, which will come into effect from January 01, 2023. The letter provides an early indication on key policy settings for the framework, to help the industry plan ahead for implementation. Later this year, APRA is expected to finalize the prudential standards on capital adequacy (APS 110), on standardized approach to credit risk (APS 112), and on internal ratings-based approach to credit risk (APS 113). Though this letter is not a formal consultation, institutions can provide feedback on the proposed policy settings by August 20, 2021. To understand the impact of the proposed revisions, APRA will conduct an optional quantitative impact study for authorized deposit-taking institutions, the responses for which are also due by August 20, 2021.

    The letter provides an update on the December 2020 consultation on the capital framework, with a targeted data study to be provided separately to participating institutions. This data study was foreshadowed in the early June 2021 letter on roadmap to 2023, which also set out a clear timeline to finalize the consultation phase by November 2021. The Annexes to letter detail the intended policy settings, under which APRA intends to:

    • maintain the approach to capital buffers outlined in the consultation package, including a base level for the countercyclical capital buffer (CCyB) of 1.0% of risk-weighted assets, as part of APS 110.
    • modify the proposed capital requirements for higher risk residential mortgage lending, with changes to the definition of long-term interest only loans, as part of APS 112.
    • revise certain settings to calibrate the new framework to meet the unquestionably strong benchmarks and simplify requirements, as part of APS 113.

    Also, in December 2020, APRA did not specify how domestic public sector entities should be treated in APS 113. To clarify, the internal ratings-based institutions would include domestic public sector entities in the definition of financial institution under APS 113. Institutions would also apply an asset value correlation multiplier set to one in calculating risk-weighted assets arising from exposures to domestic public sector entities. Nevertheless, the full suite of policy settings is not yet final and there may be further revisions to these and other issues as APRA finalizes the prudential standards later this year. Consistent with the roadmap to 2023, APRA aims to release final prudential standards in November 2021, which will come into effect from January 01, 2023.

     

    Related Links

    Comment Due Date: August 20, 2021

    Keywords: Asia Pacific, Australia, Banking, Regulatory Capital, Basel, APS 110, APS 112, APS 113, Credit Risk, Standardized Approach, IRB Approach, APRA

    Featured Experts
    Related Articles
    News

    EC Rule on Contractual Recognition of Write Down and Conversion Powers

    The European Commission (EC) published the Delegated Regulation 2021/1527 with regard to the regulatory technical standards for the contractual recognition of write down and conversion powers.

    September 17, 2021 WebPage Regulatory News
    News

    APRA Issues Further Guidance on Application of Securitization Standard

    The Australian Prudential Regulation Authority (APRA) published a new set of frequently asked questions (FAQs) to provide guidance to authorized deposit-taking institutions on the interpretation of APS 120, the prudential standard on securitization.

    September 16, 2021 WebPage Regulatory News
    News

    SRB Provides Update on Approach to Prior Permissions Regime

    The Single Resolution Board (SRB) published a Communication on the application of regulatory technical standard provisions on prior permission for reducing eligible liabilities instruments as of January 01, 2022.

    September 16, 2021 WebPage Regulatory News
    News

    APRA Publishes FAQs on Capital Treatment of Overseas Subsidiaries

    The Australian Prudential Regulation Authority (APRA) published a new set of frequently asked questions (FAQs) to clarify the regulatory capital treatment of investments in the overseas deposit-taking and insurance subsidiaries.

    September 15, 2021 WebPage Regulatory News
    News

    EBA Finalizes Guidance to Assess Breaches of Large Exposure Limits

    The European Banking Authority (EBA) published the final report on the guidelines specifying the criteria to assess the exceptional cases when institutions exceed the large exposure limits and the time and measures needed for institutions to return to compliance.

    September 15, 2021 WebPage Regulatory News
    News

    PRA Finalizes Changes to Consolidated Prudential Rules Under CRD5/CRR2

    The Prudential Regulation Authority (PRA) issued the policy statement PS20/21, which contains final rules for the application of existing consolidated prudential requirements to financial holding companies and mixed financial holding companies.

    September 15, 2021 WebPage Regulatory News
    News

    EBA Revises Guidelines on Stress Tests of Deposit Guarantee Schemes

    The European Banking Authority (EBA) revised the guidelines on stress tests to be conducted by the national deposit guarantee schemes under the Deposit Guarantee Schemes Directive (DGSD).

    September 15, 2021 WebPage Regulatory News
    News

    Nordea Bank and EIB Sign Agreement to Fund Green Projects in Nordics

    The European Commission (EC) announced that Nordea Bank has signed a guarantee agreement with the European Investment Bank (EIB) Group to support the sustainable transformation of businesses in the Nordics.

    September 15, 2021 WebPage Regulatory News
    News

    HKMA Endorses Industry Guidance to Support LIBOR Transition

    The Hong Kong Monetary Authority (HKMA) issued a circular, for all authorized institutions, to confirm its support of an information note that sets out various options available in the loan market for replacing USD LIBOR with the Secured Overnight Financing Rate (SOFR).

    September 14, 2021 WebPage Regulatory News
    News

    OCC Issues Booklet on Supervision of Problem Banks

    The Office of the Comptroller of the Currency (OCC) issued a new "Problem Bank Supervision" booklet of the Comptroller's Handbook. The booklet covers information on timely identification and rehabilitation of problem banks and their advanced supervision, enforcement, and resolution when conditions warrant.

    September 13, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 7481