Banking (prudential standard) determination No. 5 of 2008 - Prudential Standard APS 330 - Capital Adequacy: Public Disclosure of Prudential Information

Administered by Department of the Treasury

Legislation au F2008L04784 Not in force Legislative Instrument

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Banking (prudential standard) determination No. 3, 4 and 5 of 2008

EXPLANATORY STATEMENT

Prepared by the Australian Prudential Regulation Authority (APRA)

Banking Act 1959, section 11AF

 

Under subsection 11AF(1) of the Banking Act 1959 (the 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 Act, APRA may, in writing, vary or revoke a prudential standard.

Banking (prudential standard) determination No.3 of 2008 determines Prudential Standard APS 222 Associations with Related Entities to take effect on 1 January 2009.

Banking (prudential standard) determination No.4 of 2008 determines Prudential Standard APS 310 Audit and Related Matters (APS 310) to take effect on 1 January 2009.

Banking (prudential standard) determination No.5 of 2008 determines Prudential Standard APS 330 Capital Adequacy: Public Disclosure of Prudential Information  to take effect on 1 January 2009.

  1. Background

The Corporations Act 2001 imposes requirements for auditors in relation to the statutory audit of financial statements and associated matters. In addition, APRA under the existing Prudential Standard APS 310 Audit & Related Arrangements for Prudential Reporting, has imposed specific audit requirements in relation to prudential matters. These requirements are for the purposes of assisting APRA to assess the reliability of information supplied to it by an ADI. The auditor provides a mechanism for APRA to access independent advice concerning the operations, internal controls and information provided to APRA by an ADI as well as for a Level 2 group of which the ADI may be a part.

ADIs are required to engage an auditor to undertake work of a prudential nature, including checking compliance with APRA’s prudential and reporting requirements.  APRA is proposing to make a number of changes to the existing standard in order to provide greater clarity for both ADIs and their auditors as to APRA’s requirements with respect to audit engagements of a prudential nature. The revisions take account of changes in ADI group structures, new legislative provisions and, importantly, changes in reporting requirements flowing from the implementation of the Basel II Capital Framework in Australia.

While the proposed changes will formally extend audit requirements to Level 2 groups in addition to ADIs on a Level 1 basis, groups most affected by this change have typically been producing reports covering the Level 2 group already.  The extension of the prudential standard to Level 2 groups means that where the parent entity in the Level 2 group is an authorised NOHC, the standard will apply to that NOHC.

2.             Purpose of the instruments

Banking (prudential standard) determination No. 3 of 2008, determining Prudential Standard APS 222 Associations with Related Entities

This revokes the existing Prudential Standard APS 222 Associations with Related Entities and replaces it with a new standard, with only minor changes. 

The changes are in paragraphs 10 and 11. Paragraph 10 of the existing APS 222 sets out requirements for a board declaration attesting that the board and management of the ADI have identified the key risks facing the group and have established policies and systems in relation to those risks. This requirement has been moved into the new APS 310 to centralise risk management requirements with those applied to ADIs on a Level 1 basis. As a result, paragraph 10 of the new APS 222 has been modified to refer to the requirement in the new APS 310, and a similar change has been made in paragraph 11 of the new APS 222.

Banking (prudential standard) determination No. 4 of 2008, determining Prudential Standard APS 310 Audit and Related Matters

This revokes the existing APS 310 and replaces it with a new APS 310.

The new APS 310 aims to ensure that APRA has access to independent advice from an auditor relating to the operations, internal controls and information in respect of stand-alone ADIs and the Level 2 banking group of which an ADI may be a part.  It will also ensure that audit work undertaken for prudential purposes is adequate and appropriate for the purpose.

The key differences between the existing APS 310 and the new APS 310 are as follows:

  • under the new standard, ADIs will be required to formally appoint an auditor (the appointed auditor) for the purposes of undertaking work of a prudential nature. This change will help to clarify obligations and responsibilities with respect to both an ADI and its appointed auditor;
  • the new standard will provide greater clarity as to the auditor’s reporting requirements through setting out the level of audit assurance required of the appointed auditor in relation to:
    •  the review of and reporting on APRA data collections;
    • internal controls relating to prudential requirements; and
    • compliance with prudential requirements;
  • the new standard affirms that the appointed auditor must be fit and proper and satisfy independence requirements as set out in other APRA prudential standards;
  • the new standard provides details of declarations relating to risk management systems that the Board of directors and chief executive officer are required to make to APRA on a Level 1 and Level 2 basis; and
  • the new standard provides details of arrangements for meetings between APRA, an ADI and its appointed auditor.

The new standard applies to an ADI for its first financial year beginning on or after 1 January 2009.

Banking (prudential standard) determination No. 5 of 2008, determining Prudential Standard APS 330 Capital Adequacy: Public Disclosure of Prudential Information

This instrument revokes the existing APS 330 and replaces it with a new APS 330, with only a minor change. 

The change is in relation to paragraph 26.  Paragraph 26 of the existing APS 330 makes reference to a publication on the APRA website entitled ‘Materiality Guide’. This guide is now out of date and will be removed, necessitating the removal of the reference to it in APS 330.

3.            Operation of the Instrument

The purpose of Banking (prudential standard) determination No.3 of 2008 is to make the Prudential Standard APS 222 Associations with Related Entities.

The purpose of Banking (prudential standard) determination No.4 of 2008 is to make the Prudential Standard APS 310 Audit and Related Matters.

The purpose of Banking (prudential standard) determination No.5 of 2008 is to make the Prudential Standard APS 330 Capital Adequacy: Public Disclosure of Prudential Information.

4.             Consultation

APRA consulted with industry on these changes prior to finalising the proposed new arrangements.

Regulation Impact Statement

A Regulation Impact Statement is not required. 

 

Overview

The Banking (prudential standard) determination No. 3, 4 and 5 of 2008 were enacted by the Australian Prudential Regulation Authority (APRA) under the Banking Act 1959. These determinations were introduced to address gaps in the existing prudential standards for authorised deposit-taking institutions (ADIs) and authorised non-operating holding companies (authorised NOHCs). The primary aim of these instruments was to enhance the clarity and effectiveness of prudential standards, particularly in light of changes in ADI group structures, new legislative provisions, and the implementation of the Basel II Capital Framework in Australia. Banking (prudential standard) determination No. 3 of 2008 introduced a new Prudential Standard APS 222 Associations with Related Entities, replacing the previous standard with minor changes. Banking (prudential standard) determination No. 4 of 2008 introduced a new Prudential Standard APS 310 Audit and Related Matters, which aimed to ensure that APRA has access to independent advice from auditors regarding the operations, internal controls, and information of ADIs and their Level 2 banking groups. Banking (prudential standard) determination No. 5 of 2008 introduced a new Prudential Standard APS 330 Capital Adequacy: Public Disclosure of Prudential Information, which replaced the previous standard with only a minor change related to the outdated 'Materiality Guide'. APRA consulted with industry on these changes prior to finalising the new arrangements.

Scope and Application

The Banking (prudential standard) determination No. 3, 4 and 5 of 2008 are legislative instruments made under the Banking Act 1959, specifically section 11AF, which empowers the Australian Prudential Regulation Authority (APRA) to set prudential standards for authorised deposit-taking institutions (ADIs) and authorised non-operating holding companies (authorised NOHCs). These determinations apply to ADIs and authorised NOHCs, which are entities that hold deposits and are subject to regulatory oversight by APRA to ensure financial stability and soundness within the banking sector. These standards have a nationwide reach, applying across Australia and impacting all ADIs and authorised NOHCs operating within the country. The instruments include specific exclusions and thresholds as outlined in the respective prudential standards, which detail the obligations and requirements for these entities. The application and scope of these standards may be further defined or extended through subordinate instruments issued by APRA, ensuring that the regulatory framework remains adaptive to changes in the financial sector and legislative environment.

Key Provisions

The main operative sections of these determinations are sections 3, 4, and 5 of the Banking (prudential standard) determinations No. 3, 4, and 5 of 2008, respectively. These sections each revoke and replace existing prudential standards with new ones: APS 222 Associations with Related Entities, APS 310 Audit and Related Matters, and APS 330 Capital Adequacy: Public Disclosure of Prudential Information. The new standards are set to take effect on 1 January 2009. Specifically, Banking (prudential standard) determination No. 3 of 2008 replaces the existing APS 222 with minor changes, primarily moving certain requirements to the new APS 310. Banking (prudential standard) determination No. 4 of 2008 replaces the existing APS 310 with a new version, introducing formal auditor appointment requirements, clarifying auditor reporting requirements, and detailing declarations and meeting arrangements. Banking (prudential standard) determination No. 5 of 2008 replaces the existing APS 330 with a minor change, removing outdated references to a Materiality Guide. These determinations impose several obligations on authorised deposit-taking institutions (ADIs) and authorised non-operating holding companies (authorised NOHCs). ADIs must engage an auditor to undertake prudential work, including checking compliance with APRA’s requirements. Under the new APS 310, ADIs must formally appoint an auditor and ensure the auditor meets independence and fit and proper criteria. The Board of directors and chief executive officer must also make certain risk management declarations to APRA. The new APS 330 mandates that ADIs and Level 2 groups must publicly disclose prudential information, with the exception of outdated Materiality Guide references. The determinations also address potential breaches and associated penalties, although specific penalties are not detailed in the text. Generally, breaches of prudential standards under the Banking Act 1959 can lead to enforcement actions by APRA, which may include issuing directions, imposing financial penalties, or recommending other regulatory actions to the Australian government. For serious or repeated breaches, APRA may also refer matters to the Australian Securities and Investments Commission (ASIC) or other relevant authorities for further investigation and potential criminal prosecution. The exact penalties depend on the nature and severity of the breach, as well as any applicable laws and regulations.

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Reporting & Disclosure Obligations
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Sourced from the Federal Register of Legislation at 26 August 2026. For the latest information on Australian Government law please go to https://www.legislation.gov.au.