Regulation Impact Statement Updates

Official website for publishing regulatory impact analysis information for regulatory decisions announced by the Australian Government, COAG and COAG Councils.

Standardised Measurement Approach to Bank Operational Risk

Aust Gov
13th March 2020

Independent Review – Australian Prudential Regulation Authority

On 17 January 2020, the Australian Prudential Regulation Authority (APRA) determined Prudential Standard APS 115 Capital Adequacy: Standardised Measurement Approach to Operational Risk to replace the existing prudential standard for authorised deposit-taking institutions (ADIs) — which includes banks — on Advanced Measurement Approaches to Operational Risk effective from 1 January 2021. The new standard will also replace existing standardised approaches to operational risk from 1 January 2022.

The new standard updates quantitative requirements for ADIs to ensure they hold sufficient regulatory capital against operational risk and to ensure Australia continues to align with international standards. Operational risk refers to the risk of loss from inadequate or failed internal processes, people and systems or from external events.

Consistent with the Government’s Regulation Impact Statement (RIS) requirements, the APRA Discussion Paper: Revisions to the capital framework for ADIs, 14 February 2018 and APRA Response to submissions: APS 115 Capital Adequacy: Standardised Measurement Approach to Operational Risk, together, have been certified by APRA as meeting the requirements of a RIS. The Office of Best Practice Regulation (OBPR) does not assess the quality of independent reviews used in lieu of a RIS.

APRA has estimated average annual regulatory costs at $1.09 million a year. The OBPR agreed that, as the costs were less than $2 million a year, regulatory costs could be self-assessed by APRA.

Discussion Paper: Revisions to the capital framework for authorised deposit-taking institutions

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