Featured Product

    APRA Launches Second Consultation on IRRBB Framework in Australia

    September 04, 2019

    APRA has commenced the second consultation on the framework for interest rate risk in the banking book (IRRBB) for authorized deposit-taking institutions in Australia. This consultation includes the draft Prudential Standard APS 117 and APRA response to the submissions received in relation to the initial proposals on the revised IRRBB requirements. The comment period for this consultation ends on December 06, 2019. Additionally, the proposed changes of APRA to the reporting and disclosure requirements and a revised prudential practice guide for IRRBB are expected to be consulted on in 2020. APRA is proposing that the revised APS 117 will commence on January 01, 2022, in line with the international agreed Basel committee implementation timeline.

    The draft APS 117 sets out the requirements that an authorized deposit-taking institution must meet in relation to interest rate risk in the banking book. The key requirements of this proposed prudential standard are that an institution must have a framework to manage, measure, and monitor interest rate risk in the banking book commensurate with the nature, scale, and complexity of its operations. Additionally, an authorized deposit-taking institutions must apply for approval from APRA to use an internal model for determining the capital charge for IRRBB, if it has sought or received approval from APRA to use an internal ratings-based approach (IRB) to credit risk. This consultation on the IRRBB framework is part of the APRA revisions to the capital framework for authorized deposit-taking institutions to implement "unquestionably strong" capital ratios and the Basel III reforms.

    In response to the first consultation on the IRRBB framework that was launched in February 2018, APRA had received seven submissions from authorized deposit-taking institutions and industry associations. Respondents broadly supported the APRA proposal to maintain the internal modeling approach used to calculate the IRRBB capital charge, but raised some concerns in relation to standardizing various aspects of the internal modelling approach. In addition to the proposals consulted on in February 2018, APRA intends to make a number of other amendments to APS 117 to reflect the APRA implementation of the April 2016 Basel standard as well as other changes to strengthen the framework. Depending on the current modeling approach used by IRB institutions, increases in their IRRBB capital charge are expected to result from the proposals to:

    • Require the use of a 97.5th percentile expected shortfall measure instead of a 99th percentile confidence interval using a value at risk methodology
    • Require the use of absolute shocks for IRB institutions that currently use relative shocks in their IRRBB models
    • Place constraints on the duration that an institution can apply to non-maturity deposits according to whether or not it is a core deposit

     

    Related Links

    Comment Due Date: December 06, 2019

    Effective Date: January 01, 2022 (proposed)

    Keywords: Asia Pacific, Australia, Banking, Basel III, IRRBB, Interest Rate Risk, IRB Approach, Capital Adequacy, APS 117, APRA

    Featured Experts
    Related Articles
    News

    APRA Consults on Reporting Standard for Credit Risk Management

    APRA is consulting on the reporting standard for credit risk management (ARS 220.0).

    October 28, 2020 WebPage Regulatory News
    News

    Regulators Fine Goldman Sachs for Risk Management Failures

    FCA and PRA in the UK, FED in the US, and the authorities in Singapore have fined Goldman Sachs for risk management failures in connection with the 1Malaysia Development Berhad (1MDB).

    October 23, 2020 WebPage Regulatory News
    News

    ISDA Launches IBOR Fallbacks Supplement and Protocol

    ISDA launched the IBOR Fallbacks Supplement and the IBOR Fallbacks Protocol, with both becoming effective on January 25, 2021.

    October 23, 2020 WebPage Regulatory News
    News

    Canada Hosts International Conference of Banking Supervisors

    BCBS announced that OSFI and the Bank of Canada hosted the 21st International Conference of Banking Supervisors (ICBS) virtually on October 19-22, 2020.

    October 22, 2020 WebPage Regulatory News
    News

    FCA Proposes More Measures to Help Insurance Customers Amid Crisis

    FCA proposed guidance on how firms should continue to seek to help customers who hold insurance and premium finance products and may be in financial difficulty because of COVID-19, after October 31, 2020.

    October 21, 2020 WebPage Regulatory News
    News

    EBA Issues Opinion to Address Risk Stemming from Legacy Instruments

    EBA issued an opinion on prudential treatment of the legacy instruments as the grandfathering period nears an end on December 31, 2021.

    October 21, 2020 WebPage Regulatory News
    News

    ESRB Publishes Non-Bank Financial Intermediation Risk Monitor for 2020

    ESRB published the fifth issue of the EU Non-bank Financial Intermediation Risk Monitor 2020 (NBFI Monitor).

    October 21, 2020 WebPage Regulatory News
    News

    HM Treasury Publishes Policy Statement Amending Benchmarks Regulation

    HM Treasury announced that the new Financial Services Bill has been introduced in the Parliament.

    October 21, 2020 WebPage Regulatory News
    News

    APRA Initiates Action Against a Bank for Liquidity Compliance Breach

    APRA announced that it has increased the minimum liquidity requirement of Bendigo and Adelaide Bank for failing to comply with the prudential standard on liquidity.

    October 21, 2020 WebPage Regulatory News
    News

    European Council Adopts Position on Capital Markets Recovery Package

    Ambassadors of EU member states agreed on the mandate of European Council on the Capital Markets Recovery Package, to support economic recovery from the COVID-19 crisis.

    October 21, 2020 WebPage Regulatory News
    RESULTS 1 - 10 OF 6011