The Australian Prudential Regulation Authority (APRA) updated the answer to a frequently asked question (FAQ) on the treatment of loans issued under the Family Home Guarantee (FHG) and First Home Loan Deposit Scheme (FHLDS) programs of the government.
APRA has clarified that loans extended under the government’s expanded Home Guarantee Scheme, which was announced on March 28 2022, will be subject to the same regulatory treatment as previous tranches. Under the standardized approach to credit risk, loans subject to the Home Guarantee Scheme may be treated in a comparable manner to residential mortgage loans with a loan-to-valuation ratio (LVR) of 80% and accordingly risk-weighted at 35%. This risk-weight must be applied to the total amount lent to the borrower. This risk-weight reflects the government guarantee and terms of the program. Once the government guarantee ceases to apply, authorized deposit-taking institutions must revert to calculating the regulatory capital requirement in line with the existing requirements of prudential standard APS 112 on standardized approach to credit risk. For authorized deposit-taking institutions that use the internal ratings-based approach to credit risk, there are no adjustments to the capital treatment of loans subject to the Home Guarantee Scheme. This treatment will also be applicable to the new prudential standard APS 112 capital adequacy: standardized approach to credit risk, which comes into effect on January 01, 2023.
Keywords: Asia Pacific, Australia, Banking, Basel, Credit Risk, Residential Mortgage, Lending, Regulatory Capital, Standardized Approach, Internal Ratings Based Approach, APS 112, FHG, FHLDS, FAQ, APRA
Previous ArticleESMA Issues Results of Call for Evidence on ESG Ratings
Next ArticleEBA Issues Response to EC on Reviews of PSD2 and MCD
The European Financial Reporting Advisory Group (EFRAG), which plays a crucial role in shaping corporate reporting standards in European Union (EU), is seeking comments, until May 21, 2024, on the Exposure Draft ESRS for listed SMEs.
Banking regulators worldwide are increasingly focusing on addressing, monitoring, and supervising the institutions' exposure to climate and environmental risks.
The use cases of generative AI in the banking sector are evolving fast, with many institutions adopting the technology to enhance customer service and operational efficiency.
As part of the increasing regulatory focus on operational resilience, cyber risk stress testing is also becoming a crucial aspect of ensuring bank resilience in the face of cyber threats.
A few years down the road from the last global financial crisis, regulators are still issuing rules and monitoring banks to ensure that they comply with the regulations.
The European Commission (EC) recently issued an update informing that the European Council and the Parliament have endorsed the Banking Package implementing the final elements of Basel III standards
The Swiss Federal Council recently decided to further develop the Swiss Climate Scores, which it had first launched in June 2022.
The Basel Committee on Banking Supervision (BCBS) launched consultation on a Pillar 3 disclosure framework for climate-related financial risks, with the comment period ending on February 29, 2024.
The U.S. President Joe Biden signed an Executive Order, dated October 30, 2023, to ensure safe, secure, and trustworthy development and use of artificial intelligence (AI).
The Monetary Authority of Singapore (MAS) launched an integrated digital platform, Gprnt, also known as “Greenprint.”