Independent Review – Australian Prudential Regulation Authority
On 12 December 2019, the Australian Prudential Regulation Authority (APRA) released a new prudential standard for banks and other authorised deposit-taking institutions (ADIs), Prudential Standard APS 220 Credit Risk Management, to replace Prudential Standard APS 220 Credit Quality from January 2021.
The standard places a requirement on ADIs to control credit risk by adopting prudent credit risk management policies and procedures. Credit risk relates to the potential that borrowers will fail to meet their contractual obligations on loans and other credit products.
The new APS 220 incorporates Basel Committee on Banking Supervision guidance on credit-related matters and accounting standard changes issued since the prudential standard was last substantially updated in 2006. Also incorporated is APRA’s response to the recommendation of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry regarding the valuation of collateral taken by ADIs.
APRA’s Response to submissions: APS 220 Credit Risk Management report has been certified by APRA as meeting the requirements of a Regulation Impact Statement (RIS). The Office of Best Practice Regulation (OBPR) does not assess the quality of independent reviews and RIS-like documents used in lieu of a RIS.
APRA estimates the average annual regulatory costs at $3.28 million. The OBPR has agreed to the regulatory cost estimate.