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APRA releases response paper on covered bonds and securitisation

Thursday 12 July 2012


The Australian Prudential Regulation Authority (APRA) today released a response paper in relation to the issue of covered bonds by authorised deposit-taking institutions (ADIs), and the final Prudential Standard APS 121 Covered Bonds.

In October 2011, the Government amended the Banking Act 1959 to allow ADIs to issue covered bonds. Since then, APRA has been consulting on a prudential standard to apply to ADIs that issue covered bonds. These consultations included a consultation package, released in November 2011, consisting of a discussion paper and a draft prudential standard.

APRA has held discussions with a range of industry participants and received nine written submissions in response to the consultation package. The response paper released today sets out APRA’s response to issues raised during these consultations.

The response paper also addresses comments received in relation to APRA’s proposal to amend Prudential Standard APS 120 Securitisation, in relation to the capital treatment of holdings of subordinate tranches of securitisations held by an ADI other than the originator of the securitised loans. This proposal is unrelated to covered bonds, but was included in the consultation package for convenience.

The response paper can be found on the APRA website.

APS 121 can be found on the APRA website.

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, private health insurers, friendly societies, and most members of the superannuation industry. APRA currently supervises institutions holding $6 trillion in assets for Australian depositors, policyholders and superannuation fund members.