What is aps120?

This Prudential Standard aims to ensure that an authorised deposit-taking institution adopts prudent practices to manage the risks associated with securitisation and to ensure sufficient regulatory capital is held against the associated credit risk.

What is capital relief securitisation?

Capital relief trades are deals put together by banks to sell on to investors to reduce the bank’s regulatory capital requirements. Such deals can take many forms, but SCI focuses on those where synthetic or securitisation structures are utilised.

What can you securitize?

TYPES OF ASSETS THAT CAN BE SECURITIZED The most common asset types include corporate receivables, credit card receivables, auto loans and leases, mortgages, student loans and equipment loans and leases. Generally, any diverse pool of accounts receivable can be securitized.

What is a self securitisation?

Self-securitisations are structured pools of assets, such as residential mortgages, created by banks specifically to use as collateral to access liquidity from the Reserve Bank. The ability of banks to transform illiquid mortgages into liquid assets improves overall liquidity in the financial system.

What is an intermediated deposit?

Uniquely for the industry, intermediated deposits – where a financial institution collects and aggregates deposits from numerous individual retail depositors – may also receive preferential treatment under the right circumstances.

What is a synthetic Securitisation?

Versatile Risk Management and Investment ToolSynthetic securitisation is a cost-effective and fairly simple tool for transferring risk and optimising regulatory capital. It allows a high degree of customisation, enabling the parties to tailor the synthetic transaction to their risk transfer/investment needs.

What is a bank’s capital requirements?

Capital requirements are regulatory standards for banks that determine how much liquid capital (easily sold assets) they must keep on hand, concerning their overall holdings. Express as a ratio the capital requirements are based on the weighted risk of the banks’ different assets.

Why do banks securitize mortgages?

Banks may securitize debt for several reasons including risk management, balance sheet issues, greater leverage of capital, and in order to profit from origination fees.

What is a funding only Securitisation?

Funding only securitisation Let me start with the subject of the first principle I noted – funding-only securitisation – that is where an Authorised Deposit-taking Institution (ADI) is not seeking capital relief, rather the focus is on accessing term funding to support their lending activities.

Does liquidity mean cash?

Liquidity refers to the ease with which an asset, or security, can be converted into ready cash without affecting its market price. Cash is the most liquid of assets, while tangible items are less liquid. Current, quick, and cash ratios are most commonly used to measure liquidity.

What does APS 120 stand for?

The Australian Prudential Regulation Authority ( APRA) released the final version of Prudential Standard APS 120 – Securitisation ( APS 120) together with a draft Prudential Practice Guide – APG 120 Securitisation ( draft APG 120) and APRA’s Response to Submissions on draft APS 120 ( Response to Submissions ).

What is significant credit risk transfer under APS 120?

Draft APS 120 includes a simple yardstick for deemed significant credit risk transfer which is that the originating ADI group must not: hold more than 20 per cent of the junior securities issued in the securitisation, or more than 20 per cent of any tranche of junior securities issued in the securitisation; and

When will the new APS 120 take effect?

No transitional relief in respect of capital requirements. New APS 120 will take effect from 1 January 2018. Written submissions in respect of draft APG 120 due by 20 December 2016. Upcoming consultation on revised reporting requirements for securitisation and covered bonds which would also take effect from 1 January 2018.

Are securitisation exposures subject to Prudential standard APS 116?

Securitisation exposures held in an ADI’s trading book are subject to Prudential Standard APS 116 Capital Adequacy: Market Risk, except that securitisation exposures held in the trading book must be deducted from Common Equity Tier 1 Capital if they are required by this Prudential Standard to be deducted if held in the banking book.