The Australian Prudential Regulation Authority (APRA) today released a discussion paper and draft prudential standard setting out its proposed approach to market disclosure under the new Basel II capital adequacy regime, known as the Basel II Framework.
The approach applies to all locally incorporated authorised deposit-taking institutions (ADIs) in Australia.
The proposals aim to enhance transparency and market discipline in Australian financial markets through high quality and timely market disclosure on the risk management practices and capital adequacy of ADIs.
APRA Chairman Dr John Laker said that greater market disclosure is the third of the three mutually reinforcing Pillars of the Basel II Framework, complementing more risk‑sensitive minimum capital requirements and enhanced supervisory review.
“Market discipline is a close ally of the prudential regulator in rewarding those institutions that assess and manage risk effectively and penalising those where risk assessment and risk management are inadequate”, he said.
Under APRA’s proposed approach, all locally incorporated ADIs, including foreign‑owned bank subsidiaries, will be required to disclose publicly some basic quantitative information on their capital adequacy and credit risk exposures. This information is already provided to APRA on a quarterly basis. APRA is proposing that these disclosures be made in at least one location, generally on an ADI’s website.
Australian-owned ADIs that have APRA’s approval to use the more advanced Basel II approaches will be required to disclose publicly more detailed qualitative and quantitative information on their risk management practices and capital adequacy.
APRA’s market disclosure 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.
Comments on the discussion paper and draft Prudential Standard APS 330 Capital Adequacy: Market Disclosure are invited by 13 July 2007 and can be emailed to basel2@apra.gov.au.
Both the discussion paper and the draft prudential standard are available on APRA's web site 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:
Andrew McCutcheon, Public Affairs Manager
Australian Prudential Regulation Authority
Telephone: 02 9210 3143
Mobile: 0417 528 660
All other inquiries:
APRA Contact Centre 1300 131 060
