The Australian Prudential Regulation Authority (APRA) has released a letter to authorised deposit-taking institutions (ADIs) providing an updated schedule of policy priorities for the banking industry for the remainder of 2023.

APRA has reviewed its policy initiatives to prioritise some immediate actions to strengthen standards related to bank financial stability and slow down timelines on less pressing policy reforms.

Key ADI policy priorities for the remainder of 2023 are:

Liquidity: APRA will consult on targeted changes to Prudential Standard APS 210 Liquidity (APS 210), focused on the treatment of liquid assets for ADIs on the minimum liquidity holdings approach. Consequently, APRA will move the comprehensive review of APS 210 to 2024.

Interest rate risk: APRA will take additional time to finalise Prudential Standard APS 117 Capital Adequacy: Interest Rate Risk in the Banking Book (APS 117). The revised standard will be released in late 2023 and its effective date will be moved back to ensure sufficient implementation time for ADIs. APRA will also extend the scope of the review of APS 117 to consider the treatment of smaller ADIs (non-significant financial institutions).

Additional Tier 1 (AT1): The Council of Financial Regulators (CFR) discussed the challenges faced by policy makers in responding to bank stress, as highlighted during the recent bank crisis events in the United States and Switzerland. The CFR noted the importance that crisis management tools, including AT1, should operate as intended. APRA will issue a Discussion Paper to explore options for, and seek feedback from stakeholders on, improving the effectiveness of AT1 capital in Australia, ahead of potential consultation in 2024.

Capital framework updates: APRA will consult on minor updates to the bank capital framework in relation to these issues.

Consultation dates on Stored-value facilities and Crypto-assets are to be confirmed.

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