Credit risk management and related reporting standards - frequently asked questions
The following frequently asked questions (FAQs) provide information to assist regulated entities in interpreting Prudential Standard APS 220 Credit Risk Management (APS 220) and associated reporting standards.
These FAQs are for clarification purposes only and do not constitute legal advice. APRA suggests that you obtain professional advice about the application of any legislation or prudential standard to your particular circumstances. You should also exercise reasonable care and skill when using these FAQs and APRA is not liable for any loss or damage arising out of such use. The FAQs may include links to external websites that are not maintained by APRA. APRA accepts no responsibility for the accuracy, completeness or currency of any externally linked or referenced material in these FAQs.
Note: the numbering of these questions is fixed and will not change as new questions are added.
1. Following the removal of certain items from APS 220, what are APRA’s expectations for the disclosure of these items in Pillar 3 under Prudential Standard 330 Public Disclosure (APS 330)?
ADIs should continue to make disclosures based on the current APS 330, using the terms as defined in APS 330: for example, ‘impaired’ and ‘past due’ as defined in Prudential Standard APS 220 Credit Quality (revoked APS 220). When APS 330 is next revised, APRA will make the appropriate changes to update these terms.
2. Where should provisions eligible to be included in Tier 2 capital be reported in APRA reporting forms?
APRA intends to make changes to APRA reporting forms to reflect the removal of the requirement to hold a General Reserve for Credit Losses (GRCL) in Prudential Standard APS 220 Credit Risk Management when the relevant reporting forms are next updated.
As an interim measure, provisions eligible to be included in Tier 2 capital (paragraphs 42(c) and 43 of Prudential Standard APS 111 Capital Adequacy: Measurement of Capital) should continue to be reported under the GRCL item in APRA reporting forms.
3. ‘Fully Secured’ (Reporting Standard ARS 742.0 ABS/RBA Business Credit Stocks, Flows and Interest Rates) and ‘Well-Secured’ (Reporting Standard ARS 220.0 Credit Quality (ARS 220.0)) appear to have very similar definitions; can ADIs treat them as equivalent when reporting?
No, ADIs should not treat ‘Fully Secured’ in ARS 742.0 as equivalent to ‘Well-Secured’ in ARS 220.0. While there is a large overlap between the definitions of ‘Fully Secured’ and ‘Well-Secured’, there are also a number of differences that mean they are not exactly equivalent.
4. Does APRA expect that the reporting categories of ‘90 days past due’, ‘non-performing’, ‘stage 2’, and ‘restructured’ in ARS 220.0 are mutually exclusive?
No, APRA does not believe that these terms are mutually exclusive. For the purposes of Section A: Credit quality of ARS 220.0, APRA expects there will be an overlap between ‘90 days past due’, ’non-performing’ and ‘restructured’. APRA understands that there also may be some limited circumstances where overlap between ‘stage 2’ and ‘restructured’ may occur.
5. When reporting the value of exposures that are ‘90 days past due’ or ‘non-performing’ in ARS 220.0, are ADIs to report the amount of the exposure that is overdue or the total value of the exposure?
APRA recommends reporting the total value of the exposure.