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APRA Solicits Feedback on Pending Basel II Securitisation Requirements

Posted: 20 Jul 2011

The Australian Prudential Regulation Authority (APRA) has written a letter to banks seeking information on how they intend to meet new Basel II requirements for securitisation that commence January 2012.

APRA released the securitisation enhancement guidelines in May for comment to so-called “authorised deposit-taking institutions” (ADIs). The regulator notes that there will be “substantial” changes, including the requirement to perform due diligence on all securitisation exposures and identify whether exposures are securitisations or resecuritisations and are classified appropriately. The changes also will affect operational requirements for the use of external credit assessments and bank and the requirement to obtain APRA approval for secured funding arrangements that are non-complying securitisations.

APRA notes that because of the changes, boards and senior management at banks must establish policies and procedures that comply with the new securitisation standards.

“Each ADI will need to revise its securitisation policies and procedures and review all existing self-assessments to ensure compliance … by Jan. 1, 2012,” the regulator said in its letter dated July 20. “APRA’s expectation is that ADIs should have already started this process.”

APRA has given ADIs until August 31 to provide details of its plans and timelines to assure compliance with the January 2012 deadline. The regulator has advised ADIs that the details should include how banks will amend securitisation policies and procedures and the new self-assessment process and practices; how the banks will resolve any issues that come up in the self-assessments by Jan 2102; their new self-assessments for all existing securitisation reporting forms; and details on how the ADIs will assess the likely capital impact of the changes and how the ADI will address any adverse capital impacts, “such as selling down holdings of mortgage-backed securities where it is considered impractical to undertake a due diligence.”

If you have any comments about this story or news tips, contact Christopher Gohlke in New York at cgohlke@globalcustodian.com or Janet Du Chenne in London at jduchenne@globalcustodian.com.