Featured Product

    APRA Clarifies Prudential Treatment of Residential Mortgage Loans

    June 24, 2022

    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.


    Related Links


    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

    Featured Experts
    Related Articles

    FINMA Approves Merger of Credit Suisse and UBS

    The Swiss Financial Market Supervisory Authority (FINMA) has approved the takeover of Credit Suisse by UBS.

    March 21, 2023 WebPage Regulatory News

    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.

    March 13, 2023 WebPage Regulatory News

    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.

    March 12, 2023 WebPage Regulatory News

    APRA Assesses Macro-Prudential Policy Settings, Issues Other Updates

    The Australian Prudential Regulation Authority (APRA) published an information paper that assesses its macro-prudential policy settings aimed at promoting stability at a systemic level.

    March 07, 2023 WebPage Regulatory News

    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.

    March 03, 2023 WebPage Regulatory News

    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.

    March 02, 2023 WebPage Regulatory News

    MFSA Sets Out Supervisory Priorities, Issues Reporting Updates

    The Malta Financial Services Authority (MFSA) outlined its supervisory priorities for 2023

    March 02, 2023 WebPage Regulatory News

    German Regulators Issue Multiple Reporting Updates for Banks

    Deutsche Bundesbank published the nationally deactivated validation rules for the German Commercial Code (HGB) users on the taxonomy 3.2, which became valid from December 31, 2022

    March 02, 2023 WebPage Regulatory News

    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.

    February 28, 2023 WebPage Regulatory News

    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.

    February 28, 2023 WebPage Regulatory News
    RESULTS 1 - 10 OF 8806