Implementation of Basel II in Australia

The Australian Prudential Regulation Authority (APRA) today announced that it will implement the Basel II Framework in Australia from year-end 2007. Authorised deposit-taking institutions (ADIs) will be required
to meet the capital requirements of the Framework from 1 January 2008 and their prudential reporting for the quarter ended 31 March 2008 will be based on the requirements of the Framework.

The Basel II Framework, developed by the Basel Committee on Banking Supervision (Basel Committee) is a new global supervisory framework for assessing the capital adequacy of deposit-taking institutions. Under the Framework, there are several approaches available to these institutions for calculating minimum regulatory capital for different types of risk.
The Basel Committee has made all but the most sophisticated approaches for credit and operational risk available for implementation from year-end 2006, and the most sophisticated approaches from year-end 2007. The actual starting date has, however,
been left to the discretion of regulatory authorities in each country.

Following consultation with industry participants, APRA has decided on a common implementation date from year‑end 2007 for all approaches. Amongst other things,
this will allow institutions adopting the less sophisticated approaches an additional year to make the necessary system changes.

APRA’s Chairman, Dr John Laker, said that the Basel II Framework will generate substantial benefits for the global and Australian banking systems.

“APRA will be working closely with ADIs on the improvements to risk measurement, risk management and data management necessary for this Framework to succeed.”

APRA had previously advised ADIs that full implementation of the conglomerate capital adequacy regime would be postponed until 1 January 2007 to coincide with the timetable
of the Basel II Framework. The capital base on which large exposure limits are applied would also change at the same time. These changes will now come into effect from year-end 2007. However, APRA may still apply the new conglomerates regime to an ADI in respect
of any new material acquisitions made before this date.

The Australian Prudential Regulation Authority (APRA) is the prudential regulator of the financial services industry. It oversees banks, credit unions, building societies, general insurance and reinsurance companies, life insurance, friendly societies, and most members of the superannuation industry.APRA is funded largely by the industries that it supervises. It was established on 1 July 1998.APRA currently supervises institutions holding approximately $1.8 trillion in assets for 20 million Australian depositors, policyholders and superannuation fund members.

Media and industry inquiries only:	Susan Morey Head of Public Affairs Australian Prudential Regulation Authority Telephone: 02 9210 3384 Mobile: 0438 124 524
All other inquiries:	APRA Contact Centre Telephone: 1300 131 060