APRA published final versions of the prudential standard APS 220 on credit quality and the reporting standard ARS 923.2 on repayment deferrals. The reporting standard ARS 923.2 outlines the requirements for provision of information on loan repayment deferrals by an authorized deposit-taking institution. Both these standards have been published in the Federal Register of Legislation and are now in force. APRA also issued a letter to the authorized deposit-taking institutions, outlining its response to the consultation on formalizing capital measures and reporting requirements for loans impacted by COVID-19 outbreak.
Earlier, in August 2020, APRA had proposed to give effect to the temporary capital treatment of loans with repayment deferrals or restructuring due to COVID-19 by way of adjustments to APS 220. APRA had also proposed to promote public transparency by collecting and publishing entity-level data on loans impacted by COVID-19, through a new reporting standard ARS 923.2. APRA has received seven submissions in response to its consultation—all of which APRA has published. Respondents broadly supported the proposal to adjust APS 220 but sought clarification on the scope of loans eligible for the temporary capital treatment. Respondents also requested flexibility in the application of the temporary measures, particularly the treatment of restructuring and counting of arrears. In response to the request for additional flexibility for restructuring, APRA has removed the requirement under paragraph 8 of Attachment E to APS 220, which states that loans may only be restructured once. In relation to the counting of arrears, paragraph 7 has been amended to clarify that an authorized deposit-taking institution may reset the arrears count to zero where it modifies the loan to adjust for the deferral period and any existing arrears.
Additionally, respondents generally supported the proposal to collect and publish entity-level data on COVID-19 impacted loans through a new Reporting Standard, ARS 923.2. The key area of focus in submissions was reducing the reporting burden on industry, particularly for smaller authorized deposit-taking institutions. Respondents suggested that APRA should consider extending the reporting timeframe and reduce duplication with other data requests. Respondents also sought more clarity on specific data reporting items and the expectations for additional self-disclosures. To help reduce the reporting burden for smaller authorized deposit-taking institutions, APRA is:
- Increasing the publication threshold from AUD 10 million in total loans subject to repayment deferral to AUD 20 million. Where authorized deposit-taking institutions fall below the AUD 20 million threshold, they will be asked, from September, to provide ARF 923.2 on a quarterly rather than a monthly basis.
- Clarifying that, for non-listed authorized deposit-taking institutions, its expectations of public disclosures on loan repayment deferrals will be met by way of the APRA publication. APRA expects that listed authorized deposit-taking institutions will make additional information publicly available.
- Continuing to review and engage with industry on additional ways in which APRA can minimize the reporting burden during the COVID-19 period. This includes the recent extension of the due date from 10 to 15 business days for authorized deposit-taking institutions to report data on ARF 923.0 on credit and capital and the temporary pausing and review of ARF 923.1 on provisioning.
APRA is, however, maintaining the requirement for authorized deposit-taking institutions to report data on ARF 923.2 within 10 business days after the end of the reporting period to which the information relates. In response to the industry concerns over reporting duplication, APRA clarified that the data used for the entity-level publication will be taken from the existing ARF 923.2 returns.
Effective Date: September 09, 2020
Keywords: Asia Pacific, Australia, Banking, COVID-19, Credit Risk, Loan Moratorium, Regulatory Capital, Reporting, Basel, APS 220, ARS 923.2, Payment Deferrals, APRA
Previous ArticleNGFS Advocates Environmental Risk Analysis for Financial Sector
The European Commission (EC) published the Delegated Regulation 2021/1527 with regard to the regulatory technical standards for the contractual recognition of write down and conversion powers.
The Australian Prudential Regulation Authority (APRA) published a new set of frequently asked questions (FAQs) to provide guidance to authorized deposit-taking institutions on the interpretation of APS 120, the prudential standard on securitization.
The Single Resolution Board (SRB) published a Communication on the application of regulatory technical standard provisions on prior permission for reducing eligible liabilities instruments as of January 01, 2022.
The Australian Prudential Regulation Authority (APRA) published a new set of frequently asked questions (FAQs) to clarify the regulatory capital treatment of investments in the overseas deposit-taking and insurance subsidiaries.
The European Banking Authority (EBA) published the final report on the guidelines specifying the criteria to assess the exceptional cases when institutions exceed the large exposure limits and the time and measures needed for institutions to return to compliance.
The Prudential Regulation Authority (PRA) issued the policy statement PS20/21, which contains final rules for the application of existing consolidated prudential requirements to financial holding companies and mixed financial holding companies.
The European Banking Authority (EBA) revised the guidelines on stress tests to be conducted by the national deposit guarantee schemes under the Deposit Guarantee Schemes Directive (DGSD).
The European Commission (EC) announced that Nordea Bank has signed a guarantee agreement with the European Investment Bank (EIB) Group to support the sustainable transformation of businesses in the Nordics.
The Hong Kong Monetary Authority (HKMA) issued a circular, for all authorized institutions, to confirm its support of an information note that sets out various options available in the loan market for replacing USD LIBOR with the Secured Overnight Financing Rate (SOFR).
The Office of the Comptroller of the Currency (OCC) issued a new "Problem Bank Supervision" booklet of the Comptroller's Handbook. The booklet covers information on timely identification and rehabilitation of problem banks and their advanced supervision, enforcement, and resolution when conditions warrant.