Featured Product

    APRA on Interim Capital Treatment of Equity Investment in Subsidiaries

    November 10, 2020

    APRA issued a letter to all authorized deposit-taking institutions to advise of an interim change to the capital treatment of new or additional equity investments in banking and insurance subsidiaries. The planned finalization and implementation of the prudential standard APS 111 on "Capital Adequacy: Measurement of Capital" are now likely to be in 2021 and 2022, respectively; however, it is important that any new or additional equity investments made before then are undertaken with the proposed policy in mind. In the interim period, authorized deposit-taking institutions will be expected to notify APRA ahead of any new or additional equity investments in banking and insurance subsidiaries, which would result in the aggregate value of any investment exceeding 10% of the Common Equity Tier (CET)1 capital of an authorized deposit-taking institution.

    In October 2019, APRA had launched a consultation outlining planned revisions to the prudential standard APS 111. The most significant proposal in this set of revisions was an adjustment to the capital treatment of authorized deposit-taking institutions’ equity investments in banking and insurance subsidiaries. In the interim period, there will be no change to the capital treatment of any existing equity investments in the banking and insurance subsidiaries, with these exposures continued to be risk-weighted at 300% if listed or 400% if unlisted. However, until the new APS 111 is finalized and implemented, APRA will require any new or additional equity investments in banking and insurance subsidiaries, where the amount of that new or additional investments takes the aggregate value of the investment above 10% of an authorized deposit-taking institutions CET1 capital, to be fully funded by equity capital at the authorized deposit-taking institution parent company level. 

    This interim measure reflects the direction of the proposed APS 111, but does not impact existing investments. It also does not restrict or prohibit authorized deposit-taking institutions from making new investments or increasing their existing investments in banking and insurance subsidiaries in the period ahead. However, it will ensure that any new or additional equity investments, particularly where the aggregate value of the investment is large relative to the authorized deposit-taking institutions' CET1 capital, are backed by appropriate capital to reduce the risk to Australian depositors. 


    Related Links

    Keywords: Asia Pacific, Australia, Banking, Insurance, APS 111, Capital Adequacy, Equity Investment, Basel, Regulatory Capital, APRA

    Featured Experts
    Related Articles
    News

    EBA Analyzes Impact of Unwind Mechanism of Liquidity Coverage Ratio

    EBA published a report analyzing the impact of the unwind mechanism of the liquidity coverage ratio (LCR) for a sample of European banks over a three-year period, from the end of 2016 to the first quarter of 2020.

    November 19, 2020 WebPage Regulatory News
    News

    ECB Outlines Views on Possible Changes to AnaCredit Rule and TLTROs

    In response to questions from a member of the European Parliament, the ECB President Christine Lagarde issued a letter clarifying the possibility of amending the AnaCredit Regulation and making targeted longer-term refinancing operations (TLTROs) dependent on the climate-related impact of bank loans.

    November 19, 2020 WebPage Regulatory News
    News

    IASB Begins First Phase of Post-Implementation Review of IFRS 9

    IASB started the post-implementation review of the classification and measurement requirements in IFRS 9 on financial instruments and added the review as a project to its work plan.

    November 18, 2020 WebPage Regulatory News
    News

    FSB Report Examines Progress in Resolvability of Systemic Institutions

    FSB published a report that examines progress in implementing policy measures to enhance the resolvability of systemically important financial institutions.

    November 18, 2020 WebPage Regulatory News
    News

    EBA Benchmarks National Insolvency Frameworks Across EU

    EBA published a report on the benchmarking of national loan enforcement frameworks across 27 EU member states, in response to the call for advice from EC.

    November 18, 2020 WebPage Regulatory News
    News

    FSB Reports Assess Impact of Pandemic on Financial Stability

    FSB published a letter from its Chair Randal K. Quarles, along with two reports exploring various aspects of the market turmoil resulting from the COVID-19 event.

    November 17, 2020 WebPage Regulatory News
    News

    RBNZ Consults on Implementation of Capital Review Changes

    RBNZ launched a consultation on the details for implementing the final Capital Review decisions announced in December 2019.

    November 17, 2020 WebPage Regulatory News
    News

    IASB Announces Andreas Barckow as the New Chair from July 2021

    The Trustees of the IFRS Foundation, which are responsible for the governance and oversight of IASB, have announced the appointment of Dr. Andreas Barckow as the IASB Chair, effective July 2021.

    November 17, 2020 WebPage Regulatory News
    News

    HKMA Consults on Capital Rules for Bank Equity Investments in Funds

    HKMA issued a letter to consult the banking industry on a full set of proposed draft amendments to the Banking (Capital) Rules for implementing the Basel standard on capital requirements for banks’ equity investments in funds in Hong Kong.

    November 17, 2020 WebPage Regulatory News
    News

    ESRB Supports Extension of Macro-Prudential Measure by Swedish FSA

    ESRB published an opinion assessing the decision of Swedish Financial Supervisory Authority (FSA) to extend the application period of a stricter measure for residential mortgage lending, in accordance with Article 458 of the Capital Requirements Regulation (CRR).

    November 17, 2020 WebPage Regulatory News
    RESULTS 1 - 10 OF 6153