APRA to Revise Basel III Liquidity Standard by 2024
The Australian Prudential Regulation Authority (APRA) announced that the National Australia Bank Limited has acquired the consumer banking business of Citigroup Pty Limited while the country's first neo bank Volt has decided to exit the banking industry. APRA also released an information paper that presents findings of the post-implementation review of the Basel III liquidity reforms.
The post implementation review of Basel liquidity reforms focused on assessing the impact of the liquidity coverage ratio (LCR) and the net stable funding ratio (NSFR), including understanding the costs and benefits of these measures. The review found that the benefits of regulation have significantly outweighed the associated costs. However, there remain some potential opportunities to improve the efficiency of the prudential framework, which will be further explored as part of a review of APS 210, the prudential standard on liquidity. Below are the key issues that were consistently raised across the consulted stakeholders:
- Consistent with international experience and observations, there may be a reluctance by banks to draw on their liquid assets during times of stress, despite the intent of the framework.
- Industry stakeholders called for a clearer and more consolidated approach to liquidity requirements to support compliance, rationalizing APRA’s expectations and advice which are spread across the prudential standard, prudential practice guide, FAQs, and certain industry letters.
- Stakeholder submissions also put forward a number of potential technical adjustments to APS 210 to improve the efficiency of the standard, by enabling closer comparability to international practices and clarifying existing requirements.
- Stakeholders suggested changes to APS 210 to reduce compliance burden on banks or adjust the operation of the framework while continuing to consider the nuances of the Australian market
APRA intends to release a discussion paper and an accompanying draft standard in 2023. The APS 210 standard is expected to be finalized in 2024, with the implementation of the finalized standard taking place in 2025.
- Press Release on Citigroup Pty Limited
- Press Release on Volt Bank Limited
- Press Release on Liquidity Reforms
- Information Paper and Consultation Responses
Keywords: Asia Pacific, Australia, Banking, LCR, NSFR, Basel, APS 210, Liquidity Risk, Citigroup, Volt Bank, Bank Licenses, APRA
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