APRA has released for consultation a discussion paper on APRA’s proposed changes to Prudential Standard APS 120 Securitisation.

APRA’s proposals to simplify the securitisation rules include:

• explicit recognition of funding-only securitisation, that also allows for revolving securitisations or master trusts;
• simpler requirements for capital relief, matching risk to the amount of regulatory capital held;
• better integration of securitisation with the ADI liquidity regime; and
• clarification of the treatment of warehouses and similar structures.

Following consideration of submissions received, APRA intends to release a second consultation package in 2015 that will include APRA’s response to submissions as well as a draft prudential standard, prudential practice guide and associated reporting requirements, with a view to implementation in 2016. APRA also intends to release proposed reporting requirements for covered bonds with this second consultation package.

APRA does not intend to finalise any reforms to its prudential framework for securitisation until, at least, the completion of the Financial System Inquiry now underway. APRA will also have regard to proposed revisions to the securitisation framework of the Basel Committee on Banking Supervision, which have been out for consultation since December 2013.