APRA to Finalize Capital Adequacy Standard Revisions by January 2022
APRA published draft revisions to the prudential standard on capital adequacy measures (APS 111) for authorized deposit-taking institutions, along with its response to the submissions received for the 2019 consultation on the standard. APS 111 sets out the characteristics that an instrument must have to qualify as regulatory capital for an authorized deposit-taking institution and the various regulatory adjustments to be made to determine the total regulatory capital. The response paper sets out further revisions to the standard, the consultation period for which will end on June 10, 2021. APRA expects to finalize changes to APS 111 in July 2021, with the revised standard coming into force from January 01, 2022.
The most material change to APS 111 relates to the revised capital treatment of authorized deposit-taking institutions’ equity investments in their subsidiaries. This revision will, in effect, increase the amount of capital required to support equity investments in large subsidiaries and reduce the amount required for small subsidiaries. This change is not expected to increase system capital requirements, though the impact will differ across individual institutions. This proposed revision was consulted on in 2019 and is now being finalized. The revised draft standard contains additional minor revisions that were not included as part of the 2019 consultation. These revisions include measures to clarify that Common Equity Tier 1 (CET1) capital is not permitted to have any unusual features that could undermine its role as the highest quality loss-absorbing capital. APRA response paper also notes that, ahead of the implementation of the final revised APS 111, authorized deposit-taking institutions must continue to meet the interim expectations of APRA on the capital treatment of new or additional equity investments in banking and insurance subsidiaries; this was announced in November 2020 to ensure that any new or additional investments in subsidiaries align with the intended future state of APS 111.
Related Links
Comment Due Date: June 10, 2021
Effective Date: January 01, 2022
Keywords: Asia Pacific, Australia, Banking, APS 111, Capital Adequacy, Regulatory Capital, Basel, RBNZ, APRA
Featured Experts

María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer

Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.

Patrycja Oleksza
Applies proficiency and knowledge to regulatory capital and reporting analysis and coordinates business and product strategies in the banking technology area
Previous Article
ECB Working Group Publishes Recommendations on EURIBOR FallbacksRelated Articles
CFPB Finalizes Rule on Small Business Lending Data Collection
The Consumer Financial Protection Bureau (CFPB) published a final rule that sets out data collection requirements on small business lending, under section 1071 of the Dodd-Frank Act.
BCBS to Consult on Pillar 3 Climate Risk Disclosures by End of 2023
The Bank for International Settlements (BIS) published a summary of the recent Basel Committee (BCBS) meetings.
FINMA Approves Merger of Credit Suisse and UBS
The Swiss Financial Market Supervisory Authority (FINMA) has approved the takeover of Credit Suisse by UBS.
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.
US Congress Report Examines Data Privacy and Cybersecurity Regulations
The U.S. Congressional Research Service published a report on banking, data privacy, and cybersecurity regulation.
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.
EU to Conduct One-Off Scenario Analysis to Assess Transition Risk
The European authorities recently made multiple announcements that impact the banking sector.
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.
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.
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.