APRA announced that it is deferring the scheduled implementation of Basel III reforms in Australia by one year. APRA also confirmed its regulatory approach to the Term Funding Facility announced by the Reserve Bank of Australia (RBA). APRA will allow authorized deposit-taking institutions to include the benefit of the initial allowance in the calculation of the Liquidity Coverage Ratio, Minimum Liquidity Holdings Ratio, and Net Stable Funding Ratio from March 31, 2020, to the extent that they have the necessary unencumbered collateral to access the facility. APRA will provide further details to authorized deposit-taking institutions once RBA finalizes its operational requirements for the Term Funding Facility.
The APRA decision to defer implementation of Basel III reforms further supports authorized deposit-taking institutions in dedicating time and resources to maintaining their operations and supporting customers in response to COVID-19. This approach is also consistent with the recent decision by BCBS to defer, from January 2022 to January 2023, the internationally agreed start dates for the Basel III standards. As Australian authorized deposit-taking institutions are well-capitalized and meeting the unquestionably strong benchmarks set by APRA in 2017, they already have sufficient capital to meet the new requirements. Therefore, this deferral does not impact the level of capital that the authorized deposit-taking institutions are required to hold, but rather defers adjustments to the re-allocation of capital across various portfolios.
While APRA is still consulting on the majority of standards that are affected by COVID-19, the revised operational risk capital requirements were finalized in December 2019. APRA will defer the commencement of APS 115 on Standardized Measurement Approach to Operational Risk for all authorized deposit-taking institutions until January 01, 2023, but will allow banks currently using the advanced measurement approach to operational risk to opt-in to the new standardized approach for an earlier implementation from January 01, 2022 should they wish to do so. This will allow APRA to finalize the revised reporting standard over the next 12 months. APRA will formally amend the commencement date for APS 115 in due course.
Keywords: Asia Pacific, Australia, Banking, Capital Reform, Basel III, LCR, NSFR, Term Funding Facility, COVID-19, APS 115, RBA, Operational Risk, APRA
Leading economist; commercial real estate; performance forecasting, econometric infrastructure; data modeling; credit risk modeling; portfolio assessment; custom commercial real estate analysis; thought leader.
PRA published the policy statement PS8/21, which contains the final supervisory statement SS3/21 on the PRA approach to supervision of the new and growing non-systemic banks in UK.
EBA published a report that sets out the final draft regulatory technical standards specifying the conditions according to which consolidation shall be carried out in line with Article 18 of the Capital Requirements Regulation (CRR).
EBA updated the list of other systemically important institutions (O-SIIs) in EU.
BCBS published two reports that discuss transmission channels of climate-related risks to the banking system and the measurement methodologies of climate-related financial risks.
UK Authorities (FCA and PRA) welcomed the findings of FSB peer review on the implementation of financial sector remuneration reforms in the UK.
PRA and FCA jointly issued a letter that highlights risks associated with the increasing volumes of deposits that are placed with banks and building societies via deposit aggregators and how to mitigate these risks.
MFSA announced that amendments to the Banking Act, Subsidiary Legislation, and Banking Rules will be issued in the coming months, to transpose the Capital Requirements Directive (CRD5) into the national regulatory framework.
EC finalized the Delegated Regulation 2021/598 that supplements the Capital Requirements Regulation (CRR or 575/2013) and lays out the regulatory technical standards for assigning risk-weights to specialized lending exposures.
OSFI launched a consultation to explore ways to enhance the OSFI assurance over capital, leverage, and liquidity returns for banks and insurers, given the increasing complexity arising from the evolving regulatory reporting framework due to IFRS 17 (Insurance Contracts) standard and Basel III reforms.
ECB published results of the benchmarking analysis of the recovery plan cycle for 2019.