I have posted a couple of times on the revisions of the Australian bank capital adequacy framework that APRA initiated in December 2020 – most recently here where I laid out some problems I was having in understanding exactly what it will mean for an Australian ADI to be “Unquestionably Strong once the revised framework is operational. A letter to ADIs posted on APRA’s website today (2 June 2021) does not provide any answers to the questions I posed but it does give a “roadmap” outlining the steps to be undertaken to calibrate and implement the revised framework.
APRA has included a detailed indicative timeline in an attachment to the letter covering key policy releases, reporting requirements, industry workshops and the process for capital model approvals associated with the revised framework
To provide a clear roadmap for consultation and industry engagement, APRA has set out an indicative timeline in Attachment A. The timeline covers key policy releases, reporting requirements, industry workshops and the process for capital model approvals. Over the course of 2021, APRA intends to:
• Conduct a targeted data study, to assess potential changes to the calibration of the prudential standards;
• Initiate regular workshops with industry as the standards and guidance are finalised, to provide a forum for updates and FAQs; and
• Release final prudential standards, draft prudential practice guides (PPGs) and initial details of reporting requirements by the end of the year.
Over the course of 2022, APRA intends to finalise the PPGs and reporting requirements. There are a number of related policy revisions that will also be progressed next year, including the fundamental review of the trading book and public disclosure requirements. APRA intends to conduct a parallel run of capital reporting on the new framework in late 2022.APRA Letter to ADIs “ADI Capital Reforms: Roadmap to 2023”, 2 June 2021
Two key dates are
- July 2021 – “Targeted Quantitative Impact Study” (due for completion August 2021)
- November 2021 – Release of final Prudential Standards
It is not clear what, if any, information APRA will be releasing publicly between now and November 2021 when the Prudential Standards are published. I am hopeful however that the November release will be accompanied by some form of Information Paper setting out what APRA learned from the QIS and the industry workshops that it will be conducting along the way.
Exciting times for a bank capital tragic
Tony – From the Outside