APRA announces deferral of capital reform implementation

The Australian Prudential Regulation Authority (APRA) today announced it is deferring its scheduled implementation of the Basel III reforms in Australia by one year.

APRA’s decision further supports authorised deposit-taking institutions (ADIs) in dedicating time and resources to maintaining their operations and supporting customers in response to COVID-19. This approach is also consistent with the recent decision by the Basel Committee on Banking Supervision (BCBS) to defer, from January 2022 to January 2023, the internationally agreed start dates for the Basel III standards1.

Importantly, as Australian ADIs are well-capitalised and meeting the ‘unquestionably strong’ benchmarks set by APRA in 2017, they already have sufficient capital to meet the new requirements. Today’s announcement therefore does not impact the level of capital ADIs are required to hold, but rather defers adjustments to the re-allocation of capital across various portfolios.

The affected standards and their revised implementation dates are set out in the table below.

Prudential Standard

Original implementation date

Revised implementation date

APS 110 Capital Adequacy*

1 January 2022

1 January 2023

APS 112 Capital Adequacy: Standardised Approach to Credit Risk

1 January 2022

1 January 2023

APS 113 Capital Adequacy: Internal Ratings-based Approach to Credit Risk

1 January 2022

1 January 2023

APS 115 Capital Adequacy: Standardised Measurement Approach to Operational Risk

1 January 2021

(AMA banks)

1 January 2022

(all other ADIs)

1 January 2023

APS 116 Capital Adequacy: Market Risk

1 January 2023

1 January 2024

APS 117 Capital Adequacy: Interest Rate Risk in the Banking Book

1 January 2022

1 January 2023

APS 330 Public Disclosures

1 January 2022

1 January 2023

*Including the introduction of the capital floor, leverage ratio requirement, simplified framework, and improving the transparency, comparability and flexibility of the capital framework.

While APRA is still consulting on the majority of these standards, the revised operational risk capital requirements were finalised in December 2019. APRA will defer the commencement of APS 115 for all ADIs until 1 January 2023, but will allow banks currently using the advanced measurement approach to operational risk (AMA banks) to opt-in to the new standardised approach for an earlier implementation from 1 January 2022 should they wish to do so. This will allow APRA to also finalise the revised reporting standard over the next 12 months.

APRA will formally amend the commencement date for APS 115 in due course.


Footnotes:

1 Announcement is available here: https://www.bis.org/press/p200327.htm

/Public Release. The material in this public release comes from the originating organization and may be of a point-in-time nature, edited for clarity, style and length. View in full here.