Featured Product

    APRA Assesses Macro-Prudential Policy Settings, Issues Other Updates

    March 07, 2023

    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. In addition, APRA seeks feedback on proposed minor amendments to the Quarterly Authorized Deposit-taking Institution Performance (QADIP) statistical publication, with the comment period ending on April 18, 2023. The authority also released its response to the consultation, published in December 2022, on the frequency of its new centralized statistical publication of key metrics for locally incorporated authorized deposit-taking institutions.

    Assessment of Macro-Prudential Policy Settings

    The information paper provides greater transparency on macro-prudential policy setting, in line with APRA’s new framework for macro-prudential policy which was published in 2021. Based on the assessment, APRA confirmed its view that existing policy settings remain appropriate based on the current risk outlook. The current operative settings, in effect from January 01, 2023, are a 1.0% neutral level for the countercyclical capital buffer (CCyB) and a 3.0% loan serviceability buffer. APRA instituted a neutral rate of 1.0% of risk-weighted assets for the CCyB, as part of the recent reforms to the bank capital standards. APRA’s latest stress testing indicates that this would provide sufficient capacity for banks to absorb significant economic stress and maintain the supply of credit. However, in case of economic downturn or stress, APRA may consider releasing the CCyB to provide flexibility to banks to ensure they continue to lend to support households and businesses. APRA also maintained the serviceability buffer at 3.0% above the loan rate. This buffer was increased from 2.5% to 3.0% in late 2021, in an environment of heightened risks for the financial system. The objective of the serviceability buffer was to ensure that banks make prudent lending decisions, lending to borrowers that are able to repay their loans in a range of scenarios. While lending at high debt-to-income ratios has reduced, a key concern at the time, heightened risks to serviceability remains, including the potential for further interest rate rises, high inflation and risks in the labor market. It is important that all banks maintain prudent lending in the current environment of competitive pressure on standards.

    APRA expects a high degree of uncertainty in the outlook. On the one hand, there are signs of a deterioration in conditions, including falling asset prices and the potential for pockets of stress. On the other hand, lending standards are broadly sound, loan arrears remain low, and the banking system is well capitalized. Going forward, APRA will continue to closely monitor the outlook for credit growth, asset prices, lending conditions and financial resilience. Should risks to financial stability change, APRA will adjust its macro-prudential policy settings accordingly after careful consideration and consultation with other agencies on the Council of Financial Regulators or CFR.

    Response to Consultation on Centralized Publication

    In its response, APRA confirmed that all submissions were supportive of the centralized statistical publication of four metrics specified on a quarterly frequency from the start of the publication for the March quarter 2023 reference period. This publication will improve the transparency of the authorized deposit-taking institution industry and provide relief for smaller non-significant financial institution (non-SFI) authorized deposit-taking institutions from disclosure obligations. It will also provide market participants access to key data points in a way that is easier to compare and analyze than standalone individual disclosures. APRA also informed that delaying the publication to the June 2023 quarter reference period would mean there is no information for non-significant financial institution (non-SFI) authorized deposit-taking institutions publicly available for March quarter 2023 reference period due to the non-SFI carve-out under the new Prudential Standard APS 330 Public Disclosure. Thus, APRA, in order to ensure continuous availability of information for non-SFIs, does not plan to delay the start of the publication. As a next step, APRA will provide the publication prototype and a mapping template to affected authorized deposit-taking institutions by June 2023.  

    Consultation on Quarterly Statistical Publication

    APRA seeks feedback on proposed minor amendments to the Quarterly Authorized Deposit-taking Institution Performance (QADIP) publication. The consultation follows the implementation of the new capital framework for authorized deposit-taking institutions that came into effect on January 01, 2023, and proposes to update the capital adequacy tables in the QADIP publication to reflect the new framework. QADIP contains industry aggregate data on authorized deposit-taking institutions’ financial performance, financial position, capital adequacy, liquidity and asset quality. It does not contain any entity-level data. APRA’s release of the new capital framework was accompanied by a new Reporting Standard on Capital Adequacy (ARS 110.0). The capital adequacy tables in the QADIP publication require some minor updates to reflect the changes made to ARS 110.0. The proposed updates are intended to commence from the March 2023 reference period, for first publication in June 2023.


    Related Links

    Keywords: Asia Pacific, Australia, Banking, Basel, Macro-Prudential Policy, Credit Risk, Lending, Reporting, Statistical Reporting, QADIP, ARS 110, APRA

    Featured Experts
    Related Articles

    EBA Finalizes Templates for One-Off Climate Risk Scenario Analysis

    The European Banking Authority (EBA) has published the final templates, and the associated guidance, for collecting climate-related data for the one-off Fit-for-55 climate risk scenario analysis.

    November 28, 2023 WebPage Regulatory News

    EBA Mulls Inclusion of Environmental & Social Risks to Pillar 1 Rules

    The European Banking Authority (EBA) recently published a report that recommends enhancements to the Pillar 1 framework, under the prudential rules, to capture environmental and social risks.

    October 31, 2023 WebPage Regulatory News

    BCBS Consults on Disclosure of Crypto-Asset Exposures of Banks

    As a follow on from its prudential standard on the treatment of crypto-asset exposures, the Basel Committee on Banking Supervision (BCBS) proposed disclosure requirements for crypto-asset exposures of banks.

    October 19, 2023 WebPage Regulatory News

    BCBS and EBA Publish Results of Basel III Monitoring Exercise

    The Basel Committee on Banking Supervision (BCBS) and the European Banking Authority (EBA) have published results of the Basel III monitoring exercise.

    October 18, 2023 WebPage Regulatory News

    PRA Updates Timeline for Final Basel III Rules, Issues Other Updates

    The Prudential Regulation Authority (PRA) recently issued a few regulatory updates for banks, with the updated Basel implementation timelines being the key among them.

    October 18, 2023 WebPage Regulatory News

    US Treasury Sets Out Principles for Net-Zero Financing

    The U.S. Department of the Treasury has recently set out the principles for net-zero financing and investment.

    October 17, 2023 WebPage Regulatory News

    EC Launches Survey on G7 Principles on Generative AI

    The European Commission (EC) launched a stakeholder survey on the draft International Guiding Principles for organizations developing advanced artificial intelligence (AI) systems.

    October 14, 2023 WebPage Regulatory News

    ISSB Sustainability Standards Expected to Become Global Baseline

    The finalization of the two sustainability disclosure standards—IFRS S1 and IFRS S2—is expected to be a significant step forward in the harmonization of sustainability disclosures worldwide.

    September 18, 2023 WebPage Regulatory News

    IOSCO, BIS, and FSB to Intensify Focus on Decentralized Finance

    Decentralized finance (DeFi) is expected to increase in prominence, finding traction in use cases such as lending, trading, and investing, without the intermediation of traditional financial institutions.

    September 18, 2023 WebPage Regulatory News

    BCBS Assesses NSFR and Large Exposures Rules in US

    The Basel Committee on Banking Supervision (BCBS) published reports that assessed the overall implementation of the net stable funding ratio (NSFR) and the large exposures rules in the U.S.

    September 14, 2023 WebPage Regulatory News
    RESULTS 1 - 10 OF 8938