The Australian Prudential Regulation Authority (APRA) has signalled that it intends to introduce amended prudential standards and guidance notes on the measurement of capital to come into force from July 1, next year.
According to APRA, the changes will give effect to the de-linking of prudential requirements from Australian Accounting Standards; introduce additional loss absorption criteria for Innovative Tier 1 capital instruments; allow for direct issuance of Innovative Tier 1 capital instruments; and remove mandatory conversion requirements for directly issued instruments.
The APRA proposal is contained within position papers issued on Wednesday setting out its proposed prudential response to the adoption of International Financial Reporting Standards (IFRS) by APRA-regulated institutions.
Commenting on the discussion paper, APRA’s chairman, John Laker, said that while APRA’s objective was to align prudential and reporting standards with Australian accounting standards to the best extent possible, there were sound reasons for departure on these two areas.
“In shaping its approach, nonetheless, APRA is seeking to ensure that adequate levels of high quality capital underpin the financial position of Australian deposit-taking instiutions and general insurers”, he said.
