The Australian Prudential Regulation Authority (APRA) released an update on the timelines for revisions to the market risk prudential standards and the implications for the broader capital framework. The extended timelines follow the updated schedule of policy priorities, which APRA issued on September 24, 2021. This letter announces the APRA decision to extend timelines for revisions to the prudential standards on interest rate risk in the banking book or IRRBB (APS 117), market risk (APS 116), and counterparty credit risk (APS 180). The recently published APRA letter provides a summary of timing for the policy development and implementation for each of these standards in the period ahead. The revised dates are intended to provide additional time for implementation, in response to the industry feedback.
APRA wrote, in June 2021, to the authorized deposit-taking institutions mentioning its intention to release the revised APS 117 this year, with implementation from 2023. APRA has extended this timeframe in light of the industry feedback; therefore, the effective date for APS 117 will be January 01, 2024, with the provision of additional time for the associated reporting requirements and model submissions. Annex A to the letter provides a more detailed timeline for APS 117, including the following:
- The final APS 117 and the related draft Prudential Practice Guide will be released in the second quarter of 2022. The Prudential Practice Guide will be finalized in the fourth quarter of 2022.
- Reporting specifications and the draft reporting standard will be released in the second and third quarters of 2022 respectively, with the final reporting standard to be released in the second quarter of 2023 and the reporting commencement date set for March 2024
- Timeline to submit IRRBB model change requests will be March to June 2023 while the timeline for IRRBB model approval has been specified as June to September 2023.
APRA plans to implement the fundamental review of the trading book (FRTB) and the revised version of the Credit Valuation Adjustment (CVA) risk framework of the Basel Committee on Banking Supervision (BCBS) through a revised APS 116 and APS 180, respectively. Consultations on APS 116 and APS 180 will take place in 2022 and are expected to be finalized in 2023. In APRA’s view, implementing the FRTB and CVA through changes to APS 116 and APS 180 should be done in parallel, so that any interactions can be carefully considered. To this end and to allow adequate time for consultation, APRA is moving the intended effective date for APS 116 and APS 180 to January 01, 2025. Given the revised timelines, APRA will provide flexibility regarding requirements for the calculation of capital floor under the new prudential standard on capital adequacy (APS 110). The calculation of the floor will be based on existing requirements for APS 116, APS 117, and APS 180 until the revised standards become effective in 2024-2025. Early next year, APRA will confirm the timelines for its review of these market risk standards in the annual information paper on the policy priorities of APRA.
Keywords: Asia Pacific, Australia, Banking, Regulatory Capital, Timeline, Basel, Market Risk, Interest Rate Risk, Counterparty Credit Risk, Reporting, FRTB, CVA Risk, IRRBB, APRA
The European Banking Authority (EBA) launched the 2023 European Union (EU)-wide stress test, published annual reports on minimum requirement for own funds and eligible liabilities (MREL) and high earners with data as of December 2021.
The European Banking Authority (EBA) proposed implementing technical standards on the interest rate risk in the banking book (IRRBB) reporting requirements, with the comment period ending on May 02, 2023.
The U.S. Federal Reserve Board (FED) set out details of the pilot climate scenario analysis exercise to be conducted among the six largest U.S. bank holding companies.
The Board of Governors of the Federal Reserve System (FED) adopted the final rule on Adjustable Interest Rate (LIBOR) Act.
The European Central Bank (ECB) published an updated list of supervised entities, a report on the supervision of less significant institutions (LSIs), a statement on macro-prudential policy.
The Hong Kong Monetary Authority (HKMA) published a circular on the prudential treatment of crypto-asset exposures, an update on the status of transition to new interest rate benchmarks.
The European Commission (EC) adopted the standards addressing supervisory reporting of risk concentrations and intra-group transactions, benchmarking of internal approaches, and authorization of credit institutions.
The China Banking and Insurance Regulatory Commission (CBIRC) issued rules to manage the risk of off-balance sheet business of commercial banks and rules on corporate governance of financial institutions.
The Hong Kong Monetary Authority (HKMA) made announcements to address sustainability issues in the financial sector.
The European Banking Authority (EBA) published regulatory standards on identification of a group of connected clients (GCC) as well as updated the lists of identified financial conglomerates.