The Australian Prudential Regulation Authority (APRA) today issued the second of two consultation packages outlining its proposed prudential response to the adoption of International Financial Reporting Standards (IFRS) in Australia by authorised deposit-taking institutions (ADIs) and general insurers.

This consultation package, which follows industry consultation, deals with APRA's proposals to de-couple the definition of capital instruments eligible for Tier 1 capital from Australian Accounting Standards and to bring its approach to innovative capital instruments into line with international practice. It also deals with its proposals to de-couple the assessment of securitised assets for capital adequacy purposes from Australian Accounting Standards.

The consultation package includes a draft prudential standard and guidance notes for ADIs. The prudential standard for ADIs will come into effect from 1 July 2006, while new Tier 1 capital limits will be effective from 1 January 2008. Similar changes to the prudential standards for general insurers will be introduced following the completion of consultation on APRA's general insurance 'Stage 2' reforms dealing with capital, assets in Australia and custodian arrangements. These particular reforms are expected to take effect in late 2006.

Following discussions with industry, APRA has decided on a simpler set of transition arrangements for institutions affected by APRA's IFRS-related changes. These arrangements will be based on the capital base of each institution as at 1 July 2006 calculated after taking into account the overall impact of these changes.

Institutions expecting their total capital to be reduced by these changes are invited to apply to APRA for transition relief until 1 January 2008. Institutions expecting that their Innovative Tier 1 capital will exceed the proposed limit of 15 per cent of net Tier 1 capital as at 1 January 2008 may apply to APRA for a two-year transition period, until 1 January 2010.

Comments on the proposed ADI prudential standard and guidance notes are invited by 28 April 2006. The draft package follows the release in August 2005 of APRA's discussion paper, Adoption of International Financial Reporting Standards: Prudential Approach 2. Tier 1 capital and securitisation and also APRA's discussion paper Response to Submissions - Adoption of International Financial Reporting Standards: Prudential Approach 1. Fair Value and Other Issues.

APRA's consultation package is now available on the APRA web site at:

Response to submissions

Draft prudential standard and guidance notes


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 $2.2 trillion in assets for 20 million Australian depositors, policyholders and superannuation fund members.

Media and industry inquiries only:
Stuart Snell, Head of Public Affairs
Australian Prudential Regulation Authority
Telephone: 02 9210 3384
Mobile: 0407 250 276

All other inquiries:
APRA Contact Centre
1300 131 060