Document ID: chunk:federal_register_of_legislation:F2022L01576:body:0:p17
Version: federal_register_of_legislation:F2022L01576
Segment Type: other
Provision Reference: 
Character Range: 45828–48769

judgement, particularly in the robust consideration of reasonable and supportable forward-looking information, including macroeconomic factors, in its assessment and measurement of expected credit losses.
108.     An ADI must have an appropriate credit risk assessment and measurement process that provides it with a sound basis for common systems, tools and data to assess credit risk and to account for expected credit losses.

Prescribed provisioning
109.     Where APRA considers that a simple overall approach to determining provisions is acceptable for regulatory purposes, or APRA judges an ADI's own practices for identifying provisions to be inadequate in view of its credit risk profile, APRA may permit, or require, an ADI to implement the prescribed provisioning approach described in Attachment B to this Prudential Standard.
110.     Prescribed provisions are minimum provisions that an ADI must hold. Where an ADI establishes provisions under Australian Accounting Standards in excess of those prescribed, the ADI must continue for regulatory capital and APRA reporting purposes, to include any excess provisions as part of its specific provisions or provisions held against performing exposures that represent unidentified losses, as appropriate.

Supervisory limits
111.     Where APRA considers that an ADI is taking excessive credit risk relative to its financial or operational capacity to manage or absorb that risk, APRA may set limits on particular exposures or categories of exposures that may be held by that ADI, including but not limited to limits on growth or limits on the share of the ADI's portfolio, or may require the ADI to cease a particular type of lending or credit activity.
112.     If APRA considers that there is an excessive level or growth in higher risk lending or credit activity more broadly, APRA may set limits on particular types of lending, including but not limited to those set out in Attachment C to this prudential standard, to be complied with by all ADIs or a specified class of ADIs.

Adequacy of credit risk management and provisions
113.     Where APRA considers an ADI's policies, processes and practices across its credit risk activities do not meet the requirements of this Prudential Standard or otherwise considers its credit risk management deficient, APRA may require the ADI to amend credit risk management policies, processes, and practices, or adopt appropriate credit risk management policies, processes and practices, or increase the levels of provisions or write-offs reported, or otherwise increase its capital adequacy.[8]

Special purpose engagements
114.     APRA may require an ADI to appoint an independent party to review and provide a report to APRA on all or a particular aspect of the ADI's credit risk management, including provisioning practices. APRA may, however, request such a report without prior consultation with an ADI. APRA may set the terms of the