Securitisation deconsolidation principleSecuritisation deconsolidation principle

Securitisation deconsolidation principle

Except as otherwise specified in these instructions, the following applies:

Where an ADI (or a member of its Level 2 consolidated group) participates in a securitisation that meets APRA’s operational requirements for regulatory capital relief under Prudential Standard APS 120 Securitisation (APS 120):

special purpose vehicles (SPVs) holding securitised assets may be treated as non-consolidated independent third parties for regulatory reporting purposes, irrespective of whether the SPVs (or their assets) are consolidated for accounting purposes;
the assets, liabilities, revenues and expenses of the relevant SPVs may be excluded from the ADI’s reported amounts in APRA’s regulatory reporting returns; and

3. the underlying assets (i.e. the pool) under such a securitisation may be excluded from the calculation of regulatory capital (refer to APS 120), however, the ADI must still hold regulatory capital for any securitisation exposure[1] that it retains or acquires and such exposures are to be reported in Reporting Form ARF 120.1 Securitisation – Regulatory Capital. The risk-weighted assets (RWA) relating to such securitisation exposures must also be reported in ARS 110.0.

Where an ADI (or a member of its Level 2 consolidated group) participates in a securitisation that does not meet APRA’s operational requirements for regulatory capital relief under APS 120, or the ADI undertakes a funding-only securitisation or synthetic securitisation, such assets are to be reported as on-balance sheet in APRA’s regulatory reporting returns.

Requirements applying to certain ADIs

An ADI that has received IRB approval under APS 113 and has approval for partial use of the standardised approach under APS 112 is expected to report under this reporting form in respect of relevant operations that are covered by the IRB approach. There are reporting obligations under ARS 112.0 in respect of operations that remain under standardised approach.

An ADI that is operating under the APS 112 standardised approach to credit risk, but has applied to adopt IRB approach is expected to meet the requirements of this standard for those exposures they are seeking approval to use the IRB approach under APS 113.