APRA issues liquidity risk management proposals

The Australian Prudential Regulation Authority (APRA) has released for consultation proposals to enhance liquidity risk management by authorised deposit-taking institutions (ADIs).

The proposed changes to Prudential Standard APS 210 Liquidity include:

  • enhanced qualitative requirements consistent with the Principles for Sound Liquidity Risk Management and Supervision, issued by the Basel Committee on Banking Supervision in September 2008;
  • extending the ‘going concern’ cash flow projection requirement to all ADIs and lengthening the projection to at least 12 months;
  • strengthening the current APRA-defined stress testing to ensure ADIs meet a minimum acceptable level of resilience, which includes:
  • lengthening the minimum survival horizon for the current APRA-defined ‘name crisis’ scenario from five business days to one month; and
  • a standardised reporting framework for collecting regular liquidity data from ADIs, including the ability to access data at short notice in times of stress.

Subject to industry feedback and ongoing international supervisory developments, APRA will release a revised draft APS 210, an associated prudential practice guide (PPG), draft reporting standards and second-round draft reporting forms (including instructions) for further consultation early in 2010.

APRA intends to issue final standards and reporting forms in the first half of 2010.Transition arrangements will apply as appropriate.

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