The Australian Prudential Regulation Authority (APRA) today released updated prudential standards for Authorised Deposit-taking Institutions (ADIs). The revised standards, which represent minimum compulsory requirements for ADIs under the Banking Act 1959, are effective 1 July 2003.

Mr Charles Littrell, APRA's Executive General Manager for Policy, Research and Consulting, said the revisions maintain global best practice for standards governing the intra-group relationships and the large exposures of ADIs.

"We have tightened the rules on ADI exposures to third parties and to related entities within a conglomerate group by stipulating a comprehensive system of exposure limits that reflect different counter-party risks," he said. "The standards also give APRA the power to impose capital adequacy requirements at the widest level on conglomerate groups that undertake substantial insurance and/or non-financial activities."

The new standards will replace those issued in September 2000 on Capital Adequacy (APS 110); Capital Adequacy: Measurement of Capital (APS 111); Large Exposures (APS 221); and Equity Associations (APS 222).

In another move, APRA has finalised the revised requirements for ADIs deducting investments in subsidiaries from capital to avoid double counting capital for regulatory purposes. The new deduction rules will be implemented to coincide with the introduction of the new Basel Capital Accord on 1 January 2007.

"The timing provides ADIs with sufficient lead-time to adjust their capital structures and to prepare the ground for the new Accord," Mr Littrell said.

The revised prudential standards and associated guidance notes and a final draft of the prudential standards for implementation in 2007 are available on the APRA website (see below for links).

http://www.apra.gov.au/adi/ADI-Prudential-Standards-and-Guidance-Notes.cfm

http://www.apra.gov.au/Policy/Draft-Prudential-Standards-and-Guidance-Notes-for-Authorised-Deposit-Taking-Institutions.cfm

http://www.apra.gov.au/ADI/Other-Information-for-ADIs.cfm

APRA is the prudential regulator of the financial services industry including banks, credit unions, building societies, general insurance and reinsurance companies, life insurance, friendly societies, and most members of the superannuation industry. It currently regulates $1.5 trillion in assets for 20 million Australians.