Banking (prudential standard) determination No. 2 of 2011
EXPLANATORY STATEMENT
Prepared by the Australian Prudential Regulation Authority (APRA)
Banking Act 1959, section 11AF
Acts Interpretation Act 1901, section 33
Under subsection 11AF(1) of the Banking Act 1959 (the Banking Act), APRA has the power to determine standards (prudential standards), in writing, in relation to prudential matters to be complied with by authorised deposit-taking institutions (ADIs) and authorised non-operating holding companies (authorised NOHCs). Under subsection 11AF(3) of the Banking Act, APRA may, in writing, vary or revoke a prudential standard.
On 21 April 2011 APRA made Banking (prudential standard) determination No. 2 of 2011 (the instrument) under subsection 11AF(3) of the Banking Act and under subsection 33(3) of the Acts Interpretation Act 1901.
The instrument varies paragraph 11 of Prudential Standard APS 210 – Liquidity (APS 210) by deleting the words “medium term” from the following sentence:
“However, an ADI may, subject to APRA’s prior written approval, exclude from its “liabilities” any medium term notes issued under securitisations that do not comply with all requirements under Prudential Standard APS 120 Securitisation (APS 120)”.
APRA has determined that the instrument will come into force on 2 May or the date of its registration on the Federal Register of Legislative Instruments, whichever last occurs.
- Background
The instrument varies APS 210 as most recently varied by Banking (prudential standard) determination No. 1 of 2011 (determination No. 1).
Following APRA’s decision to allow an alternative capital and liquidity treatments for originating ADIs retaining any subordinated tranches(s) of a securitisation (as more fully explained in the Explanatory Statement accompanying determination No.1), APRA has received industry requests for further clarification on the status of warehouse securitisations. Upon careful consideration, APRA has decided to extend the alternative capital treatment to include warehouse securitisations where the criteria allowed under the original approval for use of the alternative capital treatment are met.
2. Purpose and operation of the instruments
The purpose of the instrument is to vary paragraph 11 of APS 210 to allow an ADI, subject to APRA’s approval, to exclude from its “liabilities” any notes issued under securitisations that do not comply with all requirements under Prudential Standard APS 120 Securitisation (APS 120). Removal of “medium term” is intended to extend the alternative capital treatment to other non-medium term notes in warehouse securitisations.
3. Consultation
No formal consultation was undertaken due to the minor nature of this amendment. APRA believes that there will not have any adverse impact on ADIs.
The OBPR has agreed (OBPR ID: 2011/12286) that the proposed changes are of a minor nature and no further analysis (in the form of a Regulation Impact Statement) is required.