Responses to a paper published by APRA in November 2011 raised several concerns. APRA has since developed a package that revises the way the reforms developed by the Basel Committee on Banking Supervision will be implemented in Australia.
The package includes a discussion paper, revised draft Prudential Standard APS 210 Liquidity (APS 210) and a draft Prudential Practice Guide APG 210 Liquidity.
Quantitative requirements for minimum liquidity holdings (MLH) for authorised deposit-taking institutions (ADIs) in Australia have also been changed.
“Submissions raised concerns about the treatment of industry support schemes and the revised definition of assets eligible for inclusion in MLH portfolios,” APRA said in a discussion paper, Implementing Basel III liquidity reforms in Australia.
“APRA has made some amendments in updated draft APS 210 in response to these submissions.”
The Basel Committee released amendments to the liquidity coverage ratio (LCR), increasing the range of liquid assets included in the definition of high-quality liquid assets (HQLA), and refinements to inflow and outflow rates.
The committee also proposed a new timetable which allowed for a “phase- in” of the LCR provisions to ensure they can be implemented “without disruption to the orderly strengthening of the banking systems”.
APRA has, however, said the definition of HQLA remains unchanged in the new draft standard.
“APRA is not proposing to adopt the phase-in arrangements,” the discussion paper said. “These arrangements were introduced in light of considerable stress facing banking systems in some regions. Australia, however, is not one of these regions.”
APRA added it was aware of concerns raised by the International Monetary Fund that Australian banks' continued reliance on offshore funding leaves them exposed to disruptions to funding markets.
“Accordingly, APRA proposes to retain its original implementation timetable for the LCR. This is a conservative approach, but one that is fully consistent with the capabilities and needs of the Australian banking system,” the regulator said.
APRA is inviting written submissions regarding APS 210 and APF 210 and intends to issue final regulations in mid-2013. The new prudential standard is expected to come into force on 1 January 2014.
