APRA Proposes Updates to Related Parties Framework for Banks
APRA proposed changes to the requirements for authorized deposit-taking institutions in managing risks from associations with related parties. The consultation outlines revisions to the Prudential Standard APS 222 Associations with Related Entities and the associated reporting standard ARS 222.0 Exposures to Related Entities. Comments period for the proposed revisions will expire on September 28, 2018 and the framework is expected to be finalized and implemented from January 01, 2020.
The prospective changes seek to update and, where possible, streamline long-standing requirements and ensure that APS 222 aligns with last year’s changes to the Prudential Standard APS 221 Large Exposures (for exposures to unrelated parties of an authorized deposit-taking institution) and the changed operating environment. Deficiencies in governance and internal controls in relation to related party dealings can lead to financial or reputational damage in one business affecting other parts of the business. The APRA proposals to modernize the framework include:
- Broadening the definition of related entities to include substantial shareholders, individual board directors, and other related individuals
- Explicitly addressing "step-in risk" by incorporating guidance from BCBS
- Tightening certain limits on exposure to related entities, in line with limits on exposures to unrelated entities in the revised APS 221
- Removing the ability for certain overseas subsidiaries to be consolidated with the standalone authorized deposit-taking institutions for prudential purposes
- Updating the existing reporting requirements to align with the changes to the framework
Related Links
Comment Due Date: September 28, 2018
Effective Date (expected): January 01, 2020
Keywords: Asia Pacific, Australia, Banking, Related Party Framework, APS 222, ARS 222, APRA
Previous Article
FED Issues the Final Regulation on SCCL for Large BanksRelated Articles
PRA Finalizes Supervisory Approach for Non-Systemic Banks in UK
PRA published the policy statement PS8/21, which contains the final supervisory statement SS3/21 on the PRA approach to supervision of the new and growing non-systemic banks in UK.
EBA Finalizes Standards on Methods of Prudential Consolidation
EBA published a report that sets out the final draft regulatory technical standards specifying the conditions according to which consolidation shall be carried out in line with Article 18 of the Capital Requirements Regulation (CRR).
EBA Updates List of Other Systemically Important Institutions in EU
EBA updated the list of other systemically important institutions (O-SIIs) in EU.
BCBS Report Concludes Basel Risk Categories Can Capture Climate Risks
BCBS published two reports that discuss transmission channels of climate-related risks to the banking system and the measurement methodologies of climate-related financial risks.
UK Authorities Welcome FSB Review of their Remuneration Regime
UK Authorities (FCA and PRA) welcomed the findings of FSB peer review on the implementation of financial sector remuneration reforms in the UK.
PRA and FCA Letter on Addressing Risks from Use of Deposit Aggregators
PRA and FCA jointly issued a letter that highlights risks associated with the increasing volumes of deposits that are placed with banks and building societies via deposit aggregators and how to mitigate these risks.
MFSA to Amend Banking Act and Rules in Coming Months to Transpose CRD5
MFSA announced that amendments to the Banking Act, Subsidiary Legislation, and Banking Rules will be issued in the coming months, to transpose the Capital Requirements Directive (CRD5) into the national regulatory framework.
EC Delegated Regulation on Specialized Lending Exposures Under CRR
EC finalized the Delegated Regulation 2021/598 that supplements the Capital Requirements Regulation (CRR or 575/2013) and lays out the regulatory technical standards for assigning risk-weights to specialized lending exposures.
OSFI Proposes to Enhance Assurance Expectations for Basel Returns
OSFI launched a consultation to explore ways to enhance the OSFI assurance over capital, leverage, and liquidity returns for banks and insurers, given the increasing complexity arising from the evolving regulatory reporting framework due to IFRS 17 (Insurance Contracts) standard and Basel III reforms.
ECB Issues Results of Benchmarking Analysis of Recovery Plans of Banks
ECB published results of the benchmarking analysis of the recovery plan cycle for 2019.
