In July, the Australian Prudential Regulation Authority (APRA) announced regulatory support for banks offering temporary financial assistance to borrowers impacted by the coronavirus pandemic and the latest round of lockdown restrictions.
As part of the changes, APRA is providing regulatory relief to authorised deposit-taking institutions (ADI), whereby for eligible borrowers, ADIs will not need to treat the deferral period as an arrears period of a loan restructuring.
This will apply to loans that are granted a repayment deferral of up to three months before the end of August 2021.
The regulator has said that it intends to formalise this regulatory support through a temporary amendment to Prudential Standard APS 220 Credit Quality (APS 220).
A draft version of this amendment, which largely mirrors the approach taken by APRA in March 2020, is open for industry feedback.
In a letter to ADIs announcing the consultation, APRA deputy chair John Lonsdale wrote: “To assist ADIs in supporting their small business, home loan and other retail customers through this period, APRA is providing a temporary regulatory treatment for loans impacted by COVID-19. For eligible borrowers, ADIs will not need to treat a repayment deferral as a loan restructuring or the period of deferral as a period of arrears.
“This prudential treatment will apply to loans that are granted a repayment deferral of up to three months on or before 31 August 2021, whether or not the borrower has previously been granted a repayment deferral. ADIs must still continue provision for these loans under relevant accounting standards.”
He added that APRA will require ADIs to disclose publicly and report the nature and terms of repayment deferrals and the volume of loans to which they are applied.
To alleviate reporting requirements for small ADIs, the threshold for the collection of reporting data for total loans subject to repayment deferral will be increased to a minimum of $50 million and 50 facilities.
The first collection of this reporting data is expected to be in late August 2021 for COVID-19-impacted loans as at 31 July 2021.
APRA said it expects that ADIs will provide the relevant data on a monthly basis within 10 business days after the end of the reporting period to which the data relates.
The regulator has confirmed that it will finalise its response and register the revised APS 220 “as soon as practicable” after the consultation period.
The consultation is open until Friday (6 August) and can be found here.
Annie Kane is the editor of The Adviser and Mortgage Business.
As well as writing about the Australian broking industry, the mortgage market, financial regulation, fintechs and the wider lending landscape – Annie is also the host of the Elite Broker and In Focus podcasts and The Adviser Live webcasts.