Independent Review - Australian Prudential Regulation Authority
In July 2018, the Australian Prudential Regulation Authority (APRA) proposed changes to the current prudential requirements for related entity risk management by banks and other authorised deposit-taking institutions (ADIs).
Following consultation, APRA made adjustments to the proposed changes in order to address stakeholder concerns, while maintaining other aspects of the original proposal where it concluded changes were warranted based on prudential considerations.
On 20 August 2019, APRA published its Response to submissions: Revisions to the related entities framework for ADIs, and also released the final revised versions of Prudential Standard APS 222 Associations with Related Entities and Reporting Standard ARS 222.0 Exposures to Related Entities. A new Reporting Standard ARS 222.2 Exposures to Related Entities – Step-in Risk was also released.
This reform updates and streamlines requirements to account for lessons learnt from the global financial crisis on mitigating the flow of contagion risk to an ADI, particularly from related entities, and ensures general alignment with APRA's revised ADI Large Exposures Framework, which came into effect on 1 January 2019.
An independent review, Revisions to the related entities framework for ADIs, has been certified by APRA as undertaking a process and analysis equivalent to a regulation impact statement. The OBPR does not assess the adequacy of independent reviews.
APRA has estimated the new requirements will result in an increase in average annual regulatory costs to business of $3.09 million.
The paper and prudential and reporting standards are all available on APRA’s website at www.apra.gov.au.