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Q2 Update - Australian Banking Regulatory Roadmap

The first quarter of 2018 has seen the introduction (yet again) of a myriad of new regulation in the Australian Financial Services industry, most notably in the areas of Finance, Risk and Regulatory Reporting. In this blog we take a look at the key regulatory announcements made in the first quarter of 2018 and how these will impact the regulatory roadmap for financial institutions in Australia for the next 3-4 years.

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APRA consults on Basel III reform

APRA is commencing consultation on revisions to its capital requirements based on the Basel III reforms and meeting the objectives of unquestionably strong capital announced in 2017 (in response to the Financial Services Inquiry).

No surprise that after the BCBS released its final papers in December 2017, APRA released for consultation its local response to the new Capital Adequacy regime.

Key announcements included:

- credit risk, specifically the treatment of the residential mortgage portfolio and other revisions to the standardised and IRB approaches

- the operational risk framework, including the replacement methodology for the advanced measurement and standardised approaches

- market risk framework and on proposed revisions to the treatment of interest rate risk in the banking book (IRRBB).

- introduction of a RWA floor for advanced modelling methodologies

APRA also proposed for a simpler capital framework for small ADIs.

APRA is undertaking a Quantitative Impact Study (QIS) to better understand the exact impact of the proposed standards which will allow for further fine-tuning of the requirements.

APRA proposes an implementation date of 1 January 2021 for all revised measures and has proposed following key dates.

APRA announces new information security standard (CPS 234)