APRA Issues Further Guidance on Application of Securitization Standard
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 FAQs address the repurchase of underlying exposures from a securitization, transfer of assets between securitizations, and credit enhancements. The FAQs are relevant for originating authorized deposit-taking institutions and authorized deposit-taking institutions that hold securitization exposures.
APS 120 is intended to ensure that an authorized deposit-taking institution adopts prudent practices to manage the risks associated with securitization and to ensure sufficient regulatory capital is held against the associated credit risk. The standard stipulates that an institution must have a risk management framework covering its involvement in a securitization, must ensure disclosure of the nature and limitations of its obligations arising from its involvement in a securitization, and must calculate regulatory capital for credit risk against its securitization exposures. An institution is required to apply the capital adequacy requirements set out in this APS 120 to securitization exposures held in its banking book. However, securitization exposures held in the trading book are subject to APS 116, the prudential standard on capital adequacy for market risk, except that securitization exposures held in the trading book must be deducted from the Common Equity Tier 1 Capital if they are required by this prudential standard to be deducted if held in the banking book. APS 120 commenced on January 01, 2018 and applies to securitizations, whether traditional, synthetic, or containing features common to both.
Related Links
Keywords: Asia Pacific, Australia, Banking, APS 120, FAQ, Securitization, Regulatory Capital, Credit Risk, Securitization Framework, Basel, APRA
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Patrycja Oleksza
Applies proficiency and knowledge to regulatory capital and reporting analysis and coordinates business and product strategies in the banking technology area
Previous Article
SRB Provides Update on Approach to Prior Permissions RegimeNext Article
ACPR Publishes Corrective Version of RUBA TaxonomyRelated Articles
EBA Finalizes Templates for One-Off Climate Risk Scenario Analysis
The European Banking Authority (EBA) has published the final templates, and the associated guidance, for collecting climate-related data for the one-off Fit-for-55 climate risk scenario analysis.
EBA Mulls Inclusion of Environmental & Social Risks to Pillar 1 Rules
The European Banking Authority (EBA) recently published a report that recommends enhancements to the Pillar 1 framework, under the prudential rules, to capture environmental and social risks.
BCBS Consults on Disclosure of Crypto-Asset Exposures of Banks
As a follow on from its prudential standard on the treatment of crypto-asset exposures, the Basel Committee on Banking Supervision (BCBS) proposed disclosure requirements for crypto-asset exposures of banks.
BCBS and EBA Publish Results of Basel III Monitoring Exercise
The Basel Committee on Banking Supervision (BCBS) and the European Banking Authority (EBA) have published results of the Basel III monitoring exercise.
PRA Updates Timeline for Final Basel III Rules, Issues Other Updates
The Prudential Regulation Authority (PRA) recently issued a few regulatory updates for banks, with the updated Basel implementation timelines being the key among them.
US Treasury Sets Out Principles for Net-Zero Financing
The U.S. Department of the Treasury has recently set out the principles for net-zero financing and investment.
EC Launches Survey on G7 Principles on Generative AI
The European Commission (EC) launched a stakeholder survey on the draft International Guiding Principles for organizations developing advanced artificial intelligence (AI) systems.
ISSB Sustainability Standards Expected to Become Global Baseline
The finalization of the two sustainability disclosure standards—IFRS S1 and IFRS S2—is expected to be a significant step forward in the harmonization of sustainability disclosures worldwide.
IOSCO, BIS, and FSB to Intensify Focus on Decentralized Finance
Decentralized finance (DeFi) is expected to increase in prominence, finding traction in use cases such as lending, trading, and investing, without the intermediation of traditional financial institutions.
BCBS Assesses NSFR and Large Exposures Rules in US
The Basel Committee on Banking Supervision (BCBS) published reports that assessed the overall implementation of the net stable funding ratio (NSFR) and the large exposures rules in the U.S.
