APRA Sets Out Roadmap for Implementation of Capital Framework Reforms
In a letter to the authorized deposit-taking institutions, APRA has set out roadmap for the implementation of the reformed capital framework. To provide a clear roadmap for consultation and industry engagement, APRA has set out an indicative timeline that covers key policy releases, reporting requirements, industry workshops, and the process for capital model approvals. This letter follows the December 2020 consultation on capital framework of authorized deposit-taking institutions. APRA is committed to meeting the January 01, 2023 implementation date, a date by when APRA expects authorized deposit-taking institutions to be fully compliant with the revised capital framework, including the determination and reporting of capital adequacy.
The relevant prudential standards are APS 110 on capital adequacy, APS 112 on standardized approach to credit risk, APS 113 on internal ratings-based approach to credit risk, and APS 117 on interest rate risk in the banking book (IRRBB). APRA expects to release final prudential standards and draft Prudential Practice Guides and to notify authorized institutions on their eligibility for the simplified framework by November 2021 while the final Prudential Practice Guides are expected to be released by the second quarter of 2021. During 2021, APRA also intends to conduct a targeted data study to assess potential changes to the calibration of the prudential standards and to initiate regular workshops with industry as the standards and guidance are finalized, to provide a forum for updates and questions.
During 2022, APRA intends to finalize the Prudential Practice Guides and reporting requirements. Revised reporting requirements will be phased in, to allow the industry time to adjust systems and ensure reliable data is provided. The reporting suite covered under these reforms will leverage the new requirements developed for ARS 220 Credit Risk Management. A number of related policy revisions will also be progressed next year, including the fundamental review of the trading book and public disclosure requirements. APRA intends to conduct a parallel run of capital reporting on the new framework in late 2022. The release of final reporting standards is expected in the second quarter of 2024 and the reporting requirements are expected to become effective in the second quarter of 2024 also. APRA also set out the timelines for approval of internal models. Authorized deposit-taking institutions using the internal ratings-based approach to credit risk will also need to seek APRA approval for relevant models, as part of the implementation of the reforms.
Keywords: Asia Pacific, Australia, Banking, Authorized Deposit Taking Institutions, APS 110, APS 112, APS 113, APS 117, IRRBB, Regulatory Capital, Credit Risk, Internal Models, Reporting, Market Risk, Capital Framework, APRA
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Applies proficiency and knowledge to regulatory capital and reporting analysis and coordinates business and product strategies in the banking technology area
Previous ArticlePRA Consults on Rules for Nonperforming Exposure Securitization
Next ArticleBaFin Consults on Determination of MREL for Banks
BOE Sets Out Its Thinking on Regulatory Capital and Climate Risks
The Bank of England (BOE) published a working paper that aims to understand the climate-related disclosures of UK financial institutions.
OSFI Finalizes on Climate Risk Guideline, Issues Other Updates
The Office of the Superintendent of Financial Institutions (OSFI) is seeking comments, until May 31, 2023, on the draft guideline on culture and behavior risk, with final guideline expected by the end of 2023.
BIS Paper Examines Impact of Greenhouse Gas Emissions on Lending
BIS issued a paper that investigates the effect of the greenhouse gas, or GHG, emissions of firms on bank loans using bank–firm matched data of Japanese listed firms from 2006 to 2018.
HMT Mulls Alignment of Ring-Fencing and Resolution Regimes for Banks
The HM Treasury (HMT) is seeking evidence, until May 07, 2023, on practicalities of aligning the ring-fencing and the banking resolution regimes for banks.
BCBS Report Examines Impact of Basel III Framework for Banks
The Basel Committee on Banking Supervision (BCBS) published results of the Basel III monitoring exercise based on the June 30, 2022 data.
PRA Consults on Prudential Rules for "Simpler-Regime" Firms
Among the recent regulatory updates from UK authorities, a key development is the first-phase consultation, from the Prudential Regulation Authority (PRA), on simplifications to the prudential framework that would apply to the simpler-regime firms.
DNB Publishes Multiple Reporting Updates for Banks
DNB, the central bank of Netherlands, updated the list of additional reporting requests and published additional data quality checks and XBRL-Formula linkbase documents for the first quarter of 2023.
NBB Sets Out Climate Risk Expectations, Issues Reporting Updates
The National Bank of Belgium (NBB) published a communication on climate-related and environmental risks, issued an update on XBRL reporting
EBA Updates Address Securitization Standards and DGS Guidelines
The European Banking Authority (EBA) published the final draft of the regulatory technical standards that set out conditions for assessment of homogeneity of the underlying exposures in simple, transparent, and standardized (STS) securitizations.
FSB Publishes Letter to G20, Sets Out Work Priorities for 2023
The Financial Stability Board (FSB) published a letter intended for the G20 Finance Ministers and Central Bank Governors, highlighting the work that FSB will take forward under the Indian G20 Presidency in 2023