APRA Proposes Guide on Resolution Planning, Issues Other Updates
The Australian Prudential Regulation Authority (APRA) recently granted NongHyup Bank a license to operate as a foreign authorized deposit-taking institution and revoked the authorized deposit-taking institution license of Volt Bank Limited. Effective from September 01, 2022, APRA also removed the 10% liquidity add-on to the net cash outflow component of the Liquidity Coverage Ratio (LCR) calculation of Westpac Banking Corporation, for breaching the APRA prudential standards on liquidity. In addition, APRA is seeking comments, until December 06, 2022, on the draft prudential practice guides on financial contingency planning (CPG 190) and resolution planning (CPG 900)] for implementing the respective draft prudential standards (CPS 900 and CPS 190).
The CPG 900 on resolution planning sets out guidance for regulated entities to assist in the implementation of the prudential standard on resolution planning (CPS 900). The draft guide sets out the outcomes that APRA is seeking to achieve at each stage of the resolution planning process and the factors that APRA will consider in developing a resolution plan for an entity. The draft practice guide explains the APRA approach to decision-making and demonstrates how entity feedback would be considered in implementing various CPS 900 requirements. Based on stakeholders feedback on CPS 900, APRA expects that small revisions to CPS 900 may be appropriate, including to clarify the Board’s role in resolution planning and the APRA expectations on on resolution planning disclosures. APRA plans to finalize both CPS 900 and CPG 900 in the first half of 2023, with the prudential standard on resolution planning coming into effect from January 01, 2024.
The CPG 190 on financial contingency planning sets out guidance for regulated entities to assist in the implementation of the prudential standard on financial contingency planning (CPS 190). The prudential standard requires all regulated entities to undertake financial contingency planning so that they are ready to respond to severe financial stress that may threaten their viability. APRA-regulated entities have the flexibility to manage their financial contingency planning practices in a manner that is best suited to achieving their objectives. The CPG 190 is principles-based, rather than prescriptive, and includes examples of better practice. APRA plans to finalize the prudential standard on financial contingency planning later in 2022 and the guidance on financial contingency planning in the first half of 2023, with the prudential standard coming into effect from January 01, 2024.
As part of the consultation on these practice guides, APRA has also mapped requirements in the proposed prudential standards to relevant guidance in the draft CPG 190 and CPG 900. The integrated versions of draft CPG 190 and CPG 900 have been provided as an additional resource, to assist industry in understanding the proposed reforms in totality.
Related Links
- Press Release on NongHyup Bank
- Press Release on Volt Bank
- Press Release on Westpac Banking Corporation
- Press Release on CPG 190 and CPG 900
- Consultation on Draft Guidance
- Draft Guide on Resolution Planning (PDF)
- Draft Guide on Contingency Planning (PDF)
Keywords: Asia Pacific, Australia, Banking, Contingency Planning, Resolution Planning, CPS 190, CPG 190, CPS 900, CPG 900, Basel, LCR, Liquidity Risk, Westpac, Volt Bank, NongHyup Bank, Resolution Framework, APRA
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