Australian Prudential Standard 120 — back to basics

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The Australian Prudential Regulation Authority (APRA) is proposing to adopt a simplified principles-based approach to prudential regulation of the Australian securitisation market.

APRA has outlined its proposed approach to the regulation of securitisation by authorised deposit-taking institutions (ADIs) going forward. The speech by Charles Littrell at the recent Australian Securitisation Forum annual conference foreshadowed what is expected when APRA releases a discussion paper on changes to Australian Prudential Standard 120 (APS 120). It is expected that the discussion paper will be followed by a consultation process commencing in early 2014, with the revised APS 120 expected to come into effect in 2015. APRA indicated there will be a transitional period for ADIs to implement the new APS 120 in securitisation structures, but it is unclear if there will be grandfathering of existing transactions.

The foundation of the new APS 120 is expected to be funding-only securitisations. APRA’s aspiration is that Australia will end up with a large and active funding-only market, with funding-only securitisations having a key role in providing market liquidity…

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