Implementation Of Basel II: APRA Releases A Raft Of Draft Prudential Standards

On 2 July 2007, APRA released two updated draft Prudential Standards: Prudential Standard APS 110 Capital Adequacy and Prudential Standard APS 111 Capital Adequacy: Measurement of Capital, and an accompanying Discussion Paper.

Submissions in respect of these new draft Prudential Standards were due by 30 July 2007. APRA proposes to issue final drafts of APS 110 and APS 111 in late 2007 and it is expected that these drafts will come into effect from 1 January 2008.

The key changes contained in the new draft APS 110 and APS 111 are set out below.

Level 1 and Level 2 changes

In the new draft APS 110, APRA's definition of Level 1 for capital adequacy purposes has been extended to also include, in addition to an ADI, certain APRA approved subsidiaries of that ADI – the new draft APS 110 refers to the ADI and these subsidiaries together as an Extended Licensed Entity ("ELE").