Independent Review – Australian Prudential Regulation Authority
On 10 November 2016, the Australian Prudential Regulation Authority (APRA) released its final revised standard on securitisation.
Securitisation involves selling a ‘pool’ of assets (typically loans) to a special purpose vehicle, which then obtains funding for these assets from the capital markets. As with loans and other exposures, Authorised Deposit-taking Institutions (ADIs) that choose to hold exposures to securitisation vehicles must hold regulatory capital against these exposures. However, ADIs may be able to reduce the amount of regulatory capital APRA requires them to hold against securitised loans by removing them from their balance sheets.
APRA’s final revised standard on securitisation is intended to provide ADIs with more flexibility in their securitisation funding arrangements, provide a simpler set of requirements for the use of securitisation and introduce more conservative regulatory capital requirements for some types of securitisation exposures.
APRA certified the process and analysis undertaken by the Authority in developing the final revised standard as an independent review equivalent to a Regulation Impact Statement (RIS) as set out in The Australian Government Guide to Regulation. APRA is therefore compliant and consistent with best practice. The Office of Best Practice Regulation (OBPR) does not assess independent reviews.
APRA estimated the final revised standard will increase regulatory burden by $4.58 million a year and identified a regulatory offset. The OBPR agreed to APRA’s regulatory burden estimate.