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Banking (prudential standard) determination No. 6 of 2023

Prudential Standard APS 120 Securitisation

Banking Act 1959

I, Clare Gibney, a delegate of APRA:

(a)               under subsection 11AF(3) of the Banking Act 1959 (the Act) REVOKE Banking (prudential standard) determination No. 2 of 2023, including Prudential Standard APS 120 Securitisation made under that determination; and

(b)               under subsection 11AF(1) of the Act DETERMINE Prudential Standard APS 120 Securitisation, in the form set out in the schedule, which applies to all ADIs and authorised NOHCs to the extent provided in paragraphs 2 to 5 of the prudential standard.

This instrument commences on 1 January 2024.

Dated: 21 November 2023

Clare Gibney

Executive Director

Policy and Advice Division

Interpretation
In this instrument:

APRA means the Australian Prudential Regulation Authority.

ADI and authorised NOHC have their respective meanings given in section 5 of the Act.

Schedule

Prudential Standard APS 120 Securitisation comprises the document commencing on the following page.

Prudential Standard APS 120

Securitisation
Objectives and key requirements of this Prudential Standard
This Prudential Standard aims to ensure that an authorised deposit-taking institution adopts prudent practices to manage the risks associated with securitisation and to ensure sufficient regulatory capital is held against the associated credit risk.
The key requirements of this Prudential Standard are that an authorised deposit-taking institution must:
     * have a risk management framework covering its involvement in a securitisation;
     * ensure there is clear and prominent disclosure of the nature and limitations of its obligations arising from its involvement in a securitisation;
     * not provide implicit support to a securitisation; and
     * calculate regulatory capital for credit risk against its securitisation exposures.

Table of Contents
Authority
Application
Interpretation
Scope
Definitions
Separation and disclosure
Exposures transferred in a securitisation
Legal opinion
General capital adequacy requirements
Implicit support and other risks
Risk management framework
Self-assessment
Transitional provisions
Prior notification
Adjustments and exclusions
Previous exercise of discretion
Attachment A — Operational requirements for regulatory capital relief
Attachment B — Operational requirements for funding-only securitisation
Attachment C — Regulatory capital required for credit risk
Attachment D — Facilities and services

Authority
     1. This Prudential Standard is made under section 11AF of the Banking Act 1959 (the Banking Act).

Application
2.             Subject to paragraphs 3 and 5, this Prudential Standard applies to an authorised deposit-taking institution (ADI) and an authorised non-operating holding company (authorised NOHC).
3.             This Prudential Standard does not apply to a purchased payment facility provider. A foreign ADI need only comply with the provisions of this Prudential Standard relating to separation and disclosure (paragraphs 13 to 18), risk management framework (paragraph 72) and self-assessment (paragraph 73 only).
4.             A reference to an ADI in this Prudential Standard, unless otherwise indicated, is a reference