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.
Keywords: Asia Pacific, Australia, Banking, APS 120, FAQ, Securitization, Regulatory Capital, Credit Risk, Securitization Framework, Basel, APRA
The three European Supervisory Authorities (ESAs) issued a letter to inform about delay in the Sustainable Finance Disclosure Regulation (SFDR) mandate, along with a Call for Evidence on greenwashing practices.
The Financial Stability Board (FSB) and the Network for Greening the Financial System (NGFS) published a joint report that outlines the initial findings from climate scenario analyses undertaken by financial authorities to assess climate-related financial risks.
The Financial Stability Board (FSB) published a letter intended for the G20 leaders, highlighting the work that it will undertake under the Indian G20 Presidency in 2023 to strengthen resilience of the financial system.
The International Sustainability Standards Board (ISSB) of the IFRS Foundations made several announcements at COP27 and with respect to its work on the sustainability standards.
The International Organization for Securities Commissions (IOSCO), at COP27, outlined the regulatory priorities for sustainability disclosures, mitigation of greenwashing, and promotion of integrity in carbon markets.
The European Banking Authority (EBA) issued a statement in the context of COP27, clarified the operationalization of intermediate EU parent undertakings (IPUs) of third-country groups
The European Union has finalized and published, in the Official Journal of the European Union, a set of 13 Delegated and Implementing Regulations applicable to the European crowdfunding service providers.
The Office of the Superintendent of Financial Institutions (OSFI) published an annual report on its activities, a report on forward-looking work.
The Australian Prudential Regulation Authority (APRA) finalized amendments to the capital framework, announced a review of the prudential framework for groups.
The Bank for International Settlements (BIS) Innovation Hubs and several central banks are working together on various central bank digital currency (CBDC) pilots.