The Australian Prudential Regulation Authority (APRA) has released an updated prudential standard on credit risk management requirements for authorised deposit-taking institutions.
The updated standard addresses recommendation 1.12 from the Final Report of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.
As recommended by the Royal Commission, APRA has amended APS 220 to require independent valuation of collateral, for the valuation to take into account the time taken for realisation of collateral and, to the extent possible, the likelihood of external events, such as drought and flood.
The revised APS 220 also provides a more consistent classification of credit exposures, by aligning recent accounting standard changes on loan provisioning requirements, as well as other guidance on credit-related matters of the Basel Committee on Banking Supervision.
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