The Australian Prudential Regulation Authority (APRA) has released for consultation a discussion paper Covered bonds and securitisation matters outlining its proposals to introduce a new prudential standard for authorised deposit-taking institutions (ADIs) that issue covered bonds as well as changes to Prudential Standard APS 120 Securitisation.

The discussion paper is accompanied by a draft of Prudential Standard APS 121 Covered bonds (APS 121). APRA will finalise APS 121 Covered bonds and related amendments to other prudential standards with a view to implementation in early 2012.

Separate from covered bonds, the proposed changes to Prudential Standard APS 120 Securitisation (APS 120) clarify the prudential treatment of holdings of subordinate tranches of securitisations held by an ADI other than the originator of the loans. Subject to feedback on this proposal, APRA envisages that the proposed changes would be incorporated into APS 120 and take effect from 1 January 2012.