The recent releases by APRA of near final drafts of APS 110, 111 and 120 means that APRA are getting close to finalising the regulatory requirements that will apply to all Banks, Building Societies and Credit Unions from 1 January next year, arising from the application of Basel II in Australia.

There are a couple that remain as yet not even been published in draft form (the infamous APS XXX on the requirements for Standardised operational risk being the most obvious) and none of them have been published in final form, but the direction is obvious and the discussion is now mostly over exact wording, rather than substance.

Important dates coming up: 30 July (today); close of comments period on the draft APS 110 and 111 on capital adequacy and 10 August; close of comments period on the draft APS 120: Securitisation. None of these is expected to be contentious as APRA have accepted most of the input from the submissions on the previous drafts.

The interesting issues now are in application. A few of the banks working towards using the advanced methods are having real trouble in convincing APRA they are ready, with at least two being told they will be delayed past the start date. Whether this is for valid reasons or not is in dispute, but provided they are allowed to go Advanced soon it should not make a major difference.

The only major bone of contention left is APRA’s insistence that the capital held against losses in the housing loan market will need to be more than double the amount the Banks have calculated – increasing the costs of housing loans. Given APRA’s track record in the area it is unlikely this will be relaxed soon.

The good points? APRA have not made the mistakes that the US regulators have and we are now fairly certain on the regulatory framework to be applied f

rom next year.