Global Regulatory Insights’ Post

APRA proposes update to bank capital framework to strengthen crisis preparedness The Australian Prudential Regulation Authority (APRA) has proposed changes to the capital framework for banks in relation to hybrid instruments to simplify and improve the effectiveness of bank capital in a crisis. The proposed changes, outlined in a discussion paper released today, seek to support financial system stability at times of crisis with simpler and more certain resolution of banks in the unlikely event of failure. They are also aimed at reinforcing confidence in the safety of deposits at times of stress. APRA is proposing that banks phase out the use of AT1 capital instruments (often called hybrid bonds) and replace them with cheaper and more reliable forms of capital that would absorb losses more effectively in times of stress. The total amount of regulatory capital that APRA requires banks to hold would remain unchanged and banks would remain ‘unquestionably strong’. https://lnkd.in/eaDhaJHw #Australia #APRA #Banking #Capitalrequirements #Solvency #Riskmanagement #Compliance #Regchange

It is possible to conceive of a severe but plausible scenario which results in a Global Systemically Important Bank (GSIB) becoming operationally paralysed. These principles are designed to be used by firms, FMIs and the Authorities in the first 24 to 48 hours of the event to support collective action and reduce the overall impact to firms, FMIs, clients, and consumers. As principles, they are designed to indicate likely collective response behaviours, thereby helping to support market confidence and to guide decision-making during a fastmoving, complex incident; however, they are not binding for firms, FMIs or the Authorities. In addition, the scope of this document does not extend to either the steps the GSIB itself would need to take to recover, or the transition point at which this could become a recovery and resolution issue. Please find here the Operationally Paralysed Global Systemically Important Bank (GSIB) Sector Response Principles: https://lnkd.in/emua2qjj CMORG-endorsed capabilities (including good practice guidance, response frameworks and contingency tools) have been developed collectively by industry to support the operational resilience of the UK financial sector. The financial authorities support the development of these capabilities and collective efforts to improve sector resilience. However, their use is voluntary, and they do not constitute regulatory rules or supervisory expectations; as such, they may not necessarily represent formal endorsement by the authorities.

Preparation is the key. Here at Chilli we have developed a service to deliver Operational Resilience for any application running on IBM i. A guaranteed recovery point achievable in under 2 hours, the time to act is now. #IBMi #operationalresilience

The Prudential Regulation Authority (PRA) (Overview) It is a part of the Bank of England and serves as the prudential regulator for banks, building societies, credit unions, insurers, and major investment firms in the United Kingdom. (Prime Purpose) Its primary role is to ensure the safety and soundness of the financial institutions it regulates, thereby contributing to the stability of the UK financial system (Key Functions of the PRA) *Supervision and Regulation *Risk Assessment *Policy Development *Enforcement *Crisis Management ( Why PRA ? ) The PRA plays a critical role in crisis management and resolution planning for financial institutions that are in distress. It works to ensure that any failure of a financial institution can be managed in an orderly way, minimizing the impact on the financial system and the economy 85/100 #pra #regulatoryreporting #riskmanagement #LIPostingChallengeIndia

Published on July 8th, 2024 by the Australian Prudential Regulation Authority (#APRA), this prudential practice guide covers the final guidelines pertaining to Interest Rate Risk in the Banking Book (#IRRBB). The related web link where this guidance was published (https://lnkd.in/dJH8C-wy) includes all the comments received by APRA from multiple bodies on their draft consultation prior to finalization in addition to APRA's response. It also includes the a prudential practice guide for Repricing Analysis and IRRBB Capital Charge with examples and excel templates to be used by reporting institutions in their disclosures. #GRC #Interestraterisk #Pillar2 #Bankingbook #repricinganalsysis #EVE #capitalcharge #capitaladequacy #Basel3 #rateshocks #durationanalysis #GAP #repricinggap #riskmanagement #riskmeasurement #hedging #guidance #practiceguide #disclosure #Pillar3 #reportingstandard #RWA #solvency

On July 24, 2024, the Australian Prudential Regulation Authority (APRA) announced finalised targeted reforms to enhance banks’ liquidity and capital requirements, aiming to bolster their ability to respond to future stress events. Key Reforms: - Minimum Liquidity Holdings (MLH) Regime: Banks will need to regularly adjust the value of their liquid assets based on market price movements. - Operational Readiness for Exceptional Liquidity Assistance (ELA): All banks must be prepared to provide key financial information when requesting ELA from the Reserve Bank of Australia. - These measures will take effect from July 1, 2025. Deferred Proposal: APRA will defer the proposal to phase out bank debt securities as liquid assets for MLH banks until a broader review of liquidity risk is conducted next year. Consultation and Engagement: - APRA received 35 submissions during the consultation period and held additional workshops and discussions with industry stakeholders. - Banks are expected to diversify their liquidity portfolios and reflect this in their annual reviews of liquid assets, to be submitted to APRA by July 1, 2025. Statements from APRA: Therese McCarthy Hockey, APRA Member: "The changes to liquidity requirements will position banks better to withstand liquidity shortfalls, similar to those that caused multiple overseas bank failures last year. Deferring changes to APRA’s liquidity standard allows further engagement with industry concerns and exploration of options to promote liquidity resilience." Follow Global Regulatory Insights for more updates! #APRA #BankingRegulation #LiquidityRequirements #FinancialStability #Australia #BankingIndustry #GRI #RegulatoryInsights

Australian Prudential Regulation Authority (#APRA) has released updated requirements for banks to better manage the impact of interest rate changes on their financial position. Here are 5 takeaways. 1️⃣ APRA's revisions to Prudential Standard APS 117 focus on reducing interest rate risk in the banking book (IRRBB capital) charge volatility, improving incentives for banks to manage their IRRBB risk, and simplifying the IRRBB framework. 2️⃣ The changes particularly address concerns related to embedded gains and losses and the observation period for capital charge methodology in larger banks, aiming to decrease volatility. 3️⃣ Based on learnings from the US crisis, APRA has also initiated a short consultation on APS 117 aspects relevant to smaller banks to capture the reprising gap using six Basel-defined interest rate shock scenarios. 4️⃣ It's also moving away from form-based reporting to table-based reporting using APRA Connect effective October 01, 2025. 5️⃣ The APRA proposal emphasizes the necessity for all banks, based on their nature and scale, to manage material risks, including IRRBB. Failure to do so may lead APRA to mandate additional regulatory capital under APS 117. The evolving methodology and growing complexity create new reporting challenges and banks of all sizes should ensure their interest rate and liquidity risk systems can manage. Learn from our OneSumX IRRBB implementations globally. Explore our integrated solution that addresses both internal financial risk and regulatory metrics. https://loom.ly/1sJlPv0 #APRA #IRRBB #OneSumX #WoltersKluwer #APAC #InterestRateRisk

At the recent DG FISMA technical workshop on macroprudential policies for Non-Bank Financial Intermediation (NBFI), EU Commissioner Mairead McGuinness delivered a keynote. Here are the highlights: 1️⃣ The urgency of addressing #NBFI is paramount. With a diverse range of entities, both regulated and unregulated, the sector's impact on financial stability cannot be overstated. 2️⃣ The EU is actively seeking to complete the Capital Markets Union (#CMU), but it requires strong political leadership to drive the necessary reforms. 3️⃣ The Commission is launching a consultation on #macroprudential policies for NBFI to assess the effectiveness of the existing framework and to improve coordination among supervisors. 4️⃣ The importance of international coordination in managing systemic risks was emphasized, with the EU engaging in forums like the FSB and IOSCO to ensure global #financialstability. 5️⃣ The need for large-scale investments to fund the transition to a #sustainablefuture was highlighted, with a call to harness the savings available for this purpose. 6️⃣ The peer review model among national and EU authorities has been effective, but there's a push to strengthen governance and reporting frameworks for better data sharing and risk detection. 7️⃣ The role of Money Market Funds (#MMFs) in short-term funding markets and the potential need to reinforce their legal framework was also discussed. Commissioner McGuinness' speech underscored the complexity and significance of NBFI in the financial ecosystem. 🗣️ Have your say during the consultation period. https://lnkd.in/eb_H6g59 #MacroprudentialPolicies #NBFI #FinancialStability #EUFinance #CMU #InternationalCoordination

Published in July 2024 by the Reserve Bank of New Zealand (RBNZ), this document summarizes the #capitaladequacy requirements that normally apply to New Zealand-incorporated registered banks. It sets out the standard conditions of registration by which the Reserve Bank imposes those requirements. It sets out the high-level definitions for #capitalratios, and refers to the other documents which provide the detail of the methods for calculating those capital ratios. This document also deals with other aspects of the capital adequacy framework, including the required actions when certain “#trigger” events occur, the minimum requirements for banks using the #internalmodelling approach, and the internal processes that banks must have for assessing capital adequacy. #GRC #solvency #RWA #BaselIII #riskmanagement #ICAAP #outputfloor #Tier1 #Tier2 #leverage #capitalplanning #IRB #SA

Following a public consultation, the Reserve Bank of Australia (RBA) has updated the settlement activity threshold under the Financial Stability Standards for Securities Settlement Facilities (SSF Standards) to balance risks and regulatory burdens on small firms. Key Highlights: - New Threshold: The SSF Standards will now apply to clearing and settlement (CS) facilities that settle $40 billion or more in financial obligations annually, up from the previous threshold of $200 million. - Effective Date: The new SSF Standards will come into effect on June 24, 2024. - Regulatory Balance: This change aims to reduce the regulatory burden on small firms while maintaining financial stability. Why It Matters: The adjustment reflects a better balance between the risks posed by smaller firms to the financial system and the regulatory requirements imposed on them, ensuring overall stability in the Australian financial system. Follow Global Regulatory Insights for the latest updates on regulatory changes and their implications. #FinancialStability #RBA #SettlementFacilities #Securities #RegulatoryUpdate #GRI #Finance #Australia