The Australian Prudential Regulation Authority (APRA) today released a paper setting out its response to industry submissions on its proposed approach to the advanced measurement approaches (AMA) to operational risk under the Basel II capital framework.

APRA's proposed approach was set out in a discussion paper in October 2005. APRA has refined its original proposals after incorporating feedback from authorised deposit-taking institutions (ADIs), as well as recent changes to international guidelines. The response paper addresses issues raised during the consultation and the revised draft prudential standard and prudential practice guide (PPG) reflect this input.

The paper includes discussion on the significant comments that were made on the operational risk regulatory capital calculation methodology and the corporate governance and risk management criteria surrounding an internal modelling approach.

The proposals form part of the Basel II capital adequacy regime for ADIs that will come into force on 1 January 2008. The full suite of Basel II prudential standards is expected to be finalised in late 2007 after a further round of consultation in the first half of 2007.

Comments on the response paper and revised draft Prudential Standard APS 115 Capital Adequacy: Advanced Measurement Approaches to Operational Risk (APS 115) and PPG are invited by 30 November 2006 and can be emailed to basel2@apra.gov.au. Both documents are available on APRA's web site (www.apra.gov.au) at http://www.apra.gov.au/ADI/Basel-II-implementation-in-Australia.cfm

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 $2.5 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