Australia's prudential regulator updates bank requirements to mitigate rate risks (updated)

Bendigo and Adelaide Bank

12/12/2023 24:24

(Adds details in paragraphs 2-5 and quotes in paragraphs 6-7)
       Dec 12 (Reuters) - Australia's prudential regulator said
on Tuesday it has updated requirements for banks to better
manage risks arising from interest rate changes following a
consultation in November last year.
    The Australian Prudential Regulation Authority (APRA) has
revised Prudential Standard APS 117 Interest Rate Risk in the
Banking Book (IRRBB), aimed at reducing some volatility in the
IRRBB charge, among others.
    IRRBB is the risk to earnings or value arising from 
movements in interest rates that affect banking book positions.
    The revisions came after central banks globally raised
interest rates sharply in an effort to curb stubbornly high
inflation.
    The regulator said it has now started a short consultation
on some aspects of APS 117 which are also relevant to smaller
banks.
    "A failure to manage interest rate risk was one of the
primary factors behind the collapse of several U.S. banks this
year," APRA member Therese McCarthy Hockey said.
    "The new and proposed changes incorporate lessons learned
from the recent large interest rate movements and overseas bank
failures."
    The regulator intends to finalise APS 117 by the middle of
2024, ahead of the updated standard coming into effect from Oct.
1, 2025. 

 (Reporting by Archishma Iyer in Bengaluru; Editing by
Subhranshu Sahu)
 ((Archishma.Iyer@thomsonreuters.com;))