The Australian Prudential Regulation Authority (APRA) has released details of proposed changes to capital requirements for authorised deposit-taking institutions (ADIs) and general insurers (GIs).
These proposed changes are outlined in a Discussion Paper and incorporated in draft Prudential Standards APS 110 Capital Adequacy and APS 111 Capital Adequacy: Measurement of Capital. In addition, to maintain consistency in APRA’s approach to capital adequacy between ADIs and GIs, a number of these amendments will be carried over to Prudential Standard GPS 110 Capital Adequacy.
The proposed changes arise from the adoption of the Basel II Capital Framework in Australia, finalising APRA’s treatment of conglomerate groups containing one or more locally incorporated ADIs and responses to accounting and market developments since the standards were last updated.
APRA Chairman Dr John Laker said in view of the introduction of Basel II, changes in banking practices in Australia and changes in the structure of groups in which ADIs operate, some amendments to the capital adequacy requirements for ADIs are needed.
“The amended prudential standards are intended to align APRA’s capital requirements with international practice and to underpin the quality of capital held by ADIs and GIs,” Dr Laker said.
APRA proposes to finalise and issue the ADI prudential standards in late 2007. They will have effect from 1 January 2008 as part of a substantial set of changes to prudential standards to implement the Basel II Capital Framework. Changes to capital requirements for GIs will be implemented in 2008.
Written submissions on the proposed changes to capital requirements should be received no later than 30 July 2007 and sent to capital@apra.gov.au.
The Discussion Paper and the draft prudential standards for ADIs are available on APRA’s website at http://www.apra.gov.au/Policy/Capital-adequacy-for-authorised-deposit-taking-institutions-and-general-insurers.cfm. Details of the proposed changes for GIs are set out in Attachment C to the Discussion Paper.
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
