Document ID: chunk:federal_register_of_legislation:F2024L01073:front:0:p1
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Banking (prudential standard) determination No. 1 of 2024

Prudential Standard APS 112 Capital Adequacy: Standardised Approach to Credit Risk

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. 6 of 2022, including Prudential Standard APS 112 Capital Adequacy: Standardised Approach to Credit Risk made under that determination; and

    (b) under subsection 11AF(1) of the Act, DETERMINE Prudential Standard APS 112 Capital Adequacy: Standardised Approach to Credit Risk in the form set out in the schedule, which applies to all ADIs and authorised NOHCs to the extent provided in paragraphs 2 to 4 of the prudential standard.

This instrument commences on 30 September 2024.

Dated: 27 August 2024

Clare Gibney
Executive Director
Policy & Advice Division

Interpretation
In this instrument:

    APRA means the Australian Prudential Regulation Authority.

ADI, authorised NOHC and prudential standard have their respective meanings given in subsection 5(1) of the Act.

Schedule

Prudential Standard APS 112 Capital Adequacy: Standardised Approach to Credit Risk comprises the document commencing on the following page.

Prudential Standard APS 112

Capital Adequacy: Standardised Approach to Credit Risk
Objectives and key requirements of this Prudential Standard
This Prudential Standard requires an authorised deposit-taking institution to hold sufficient regulatory capital against its credit risk exposures.
The key requirements of this Prudential Standard are that an authorised deposit-taking institution:
     * must apply risk weights to its on- and off-balance sheet exposures for capital adequacy purposes. Risk weights are broadly aligned with the likelihood of counterparty default; and
     * may reduce the credit risk capital requirement for its on- and off-balance sheet exposures where the exposure is covered by eligible lenders' mortgage insurance, or an eligible credit risk mitigation technique.

Table of Contents
Authority
Application and commencement
Interpretation
Adjustments and exclusions
Previous exercise of discretion
Scope
Definitions
Key principles
Risk-weighting approach
Credit risk mitigation
Attachment A – Risk weights for property exposures
Attachment B – Risk weights for non-property exposures
Attachment C – Off-balance sheet commitments
Attachment D – Unsettled and failed transactions
Attachment E – Defaulted exposures
Attachment F – External credit ratings
Attachment G – Collateralised transactions
Attachment H – Netting
Attachment I – Guarantees
Attachment J – Credit derivatives

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

Application and commencement
 1.              This Prudential Standard applies to all authorised deposit-taking institutions (ADIs) with the exception of:
         1.           foreign ADIs; and
         2.           purchased payment facility providers.
 2.              A reference to an ADI in this Prudential Standard, unless otherwise indicated, is a reference to:
         1.           an ADI on a Level 1 basis; and
         2.           a group of which an ADI