APRA flexes muscle in relation to securitisation

The amendments proposed to APS 120 and APG 120 are, to the extent they implement the "Basel II Enhancements", not controversial. In fact APRA has largely incorporated the enhancements verbatim. The controversy arises from the other amendments which APRA has taken the opportunity to make to APS 120 and its non-binding guidance document APG 120. APRA's justification for the changes is that they are required to address issues that have arisen since the current standards became effective in January 2008 and in response to industry requests for clarification. APRA suggests that these amendments are, in part, consistent with concerns it raised to the industry in letters to ADIs on Securitisation and Funds Management (8 April 2009) and on Covered Bonds (29 April 2008). Although the amendments do reflect some of APRA's thinking in that correspondence with ADIs, with respect to some particular aspects the amendments go a step further.