Document ID: chunk:federal_register_of_legislation:F2012L02334:body:0:p1
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Banking (prudential standard) determination No. 10 of 2012

Prudential Standard APS 117 Capital Adequacy: Interest Rate Risk in the Banking Book (Advanced ADIs)

Banking Act 1959

I, John Francis Laker, delegate of APRA:

    (a) under subsection 11AF(3) of the Banking Act 1959 (the Act) REVOKE Banking (prudential standard) determination No. 10 of 2007 including Prudential Standard APS 117 Capital Adequacy: Interest Rate Risk in the Banking Book (Advanced ADIs) made under that Determination; and

    (b) under subsection 11AF(1) of the Act DETERMINE Prudential Standard APS 117 Capital Adequacy: Interest Rate Risk in the Banking Book (Advanced ADIs) in the form set out in the attached Schedule, which applies to ADIs and authorised NOHCs to the extent provided in paragraphs 2 to 4 of the prudential standard.

This instrument takes effect on 1 January 2013.

Dated 29 November 2012

[Signed]

John Francis Laker
Chair

Interpretation

In this instrument:

ADI  is short for authorised deposit-taking institution which has the meaning given in section 5 of the Act.

APRA means the Australian Prudential Regulation Authority.

authorised NOHC has the meaning given in section 5 of the Act.

Schedule

Prudential Standard APS 117 Capital Adequacy: Interest Rate Risk in the Banking Book (Advanced ADIs) comprises the 18 pages commencing on the following page.

Prudential Standard APS 117

Capital Adequacy: Interest Rate Risk in the Banking Book (Advanced ADIs)

Objective and key requirements of this Prudential Standard

This Prudential Standard sets out the requirements that an authorised deposit-taking institution with approval to use an internal model for interest rate risk in the banking book must meet for regulatory capital purposes, both at the time of initial implementation and on an ongoing basis.

The key requirements of this Prudential Standard are that an authorised deposit-taking institution must have:

     * a framework to manage, measure and monitor interest rate risk in the banking book commensurate with the nature, scale and complexity of the institution's operations; and
     * approval from APRA to use an internal model for determining the institution's capital requirement for interest rate risk in the banking book.

Table of contents

Authority
Application
Interpretation
Scope
Definitions
Key principles
Approval process
Adoption of the internal model approach
Interest rate risk in the banking book management framework
Interest rate risk in the banking book measurement system

Attachments

Attachment A - Governance and the interest rate risk in the banking book management framework

Attachment B  - Quantitative standards for measuring the capital requirement

Authority

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

Application

    2.             This Prudential Standard applies to authorised deposit-taking institutions (ADIs) that are seeking or have been given approval to use an internal model approach for interest rate