APRA releases revised Basel II securitisation standard

The Australian Prudential Regulation Authority (APRA)
has released a paper that sets out its response to submissions on its
proposals to update APRA’s existing
prudential framework for securitisation to incorporate the new Basel
capital adequacy regime (the Basel II Framework) as well as
market developments.

APRA’s response paper is accompanied by a
final draft Prudential Standard APS 120 Securitisation that sets out the
general requirements applying to the involvement of an authorised
deposit-taking institution (ADI) in securitisation activities, as well
as the methodology for the calculation of an ADI’s credit risk
regulatory capital requirement for securitisation exposures.

In developing the final draft APS 120, APRA has been guided by the general principle that a securitisation stands clearly separate from an ADI and is not implicitly or explicitly reliant on an ADI for funding, operations or to maintain its market standing, while at the same time not unduly disrupting existing arrangements and market practices.

The proposals form part of the Basel II
capital adequacy regime for ADIs that will come into force on 1 January
2008. The full suite of Basel II prudential standards is expected to be
finalised in late 2007.

Comments on the response paper and the
final draft Prudential Standard APS 120 Securitisation are invited by
10 August 2007.

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