• Policy Framework for the Prudential Supervision of Conglomerate Groups Containing Authorised Deposit-taking Institutions (PDF 268KB)

The Australian Prudential Regulation Authority (APRA) today released a Policy Information Paper outlining a framework for the prudential supervision of conglomerate groups which include an Authorised Deposit-taking Institution (ADI). The new policy framework will:

• expand the range of organisational structures which conglomerates may adopt;
• liberalise the range of activities that can be carried out within a conglomerate group containing an ADI; and
• provide a workable, and consistent, prudential supervision framework for these new arrangements.

Importantly, the framework provides the basis for APRA to assess and license new, non-traditional entrants to the regulated financial sector. These could include groups headed by authorised non-operating holding companies (NOHCs) and groups that include both deposit-taking and non-financial business.

The policies have evolved from proposals outlined in Policy Discussion Papers issued by APRA in March and November 1999. Following extensive discussion with industry, most of the proposals outlined in the November Discussion Paper are now being adopted, with the exception of those relating to capital adequacy and intra-group and group exposures. These issues have been set aside pending further analysis and discussion with the industry, and a closer examination of policies in other countries. This process should be completed by around the end of the year. For the interim, existing policies will continue to apply in these areas.

At this stage, the policies are in the form of guidelines, but they will eventually be incorporated into Prudential Standards issued under the Banking Act 1959. For the most part, application of policies that differ from those currently applying will await the formulation of the Prudential Standards. The task of transforming the guidelines into Standards will begin after the first round of harmonisation of ADI Standards, currently under way, is completed around the middle of 2000. When introduced, there may be instances where some institutions do not comply with all the new requirements. Institutions in this position should approach APRA and reasonable transition arrangements will be negotiated.

Policies relating to the types of conglomerate group in which ADI activities are permitted will have immediate application.

For further information contact:

Brian Gray
Executive General Manager
Policy, Research and Consulting
(02) 9210 3141