Mackay Chapman June APRA Update
In this month’s APRA update:
- New pathway opens IRB accreditation to more banks
- Licence conditions imposed on HUB24 Super trustee
- Macroprudential settings remain unchanged
- Banking rules to become more proportionate
More details outlined below.
New pathway opens IRB accreditation to more banks
APRA has finalised a revised accreditation pathway that will make it easier for medium-sized banks to adopt the internal ratings-based (IRB) approach for calculating credit risk.
The IRB approach allows banks to use their own risk models, subject to regulatory approval, rather than relying solely on standardised measures. This can result in capital requirements that more closely reflect actual risk exposures, potentially improving pricing competitiveness.
The changes are designed to make the accreditation process more transparent and flexible while maintaining prudential safeguards. To date, only six Australian banks have received IRB accreditation, including the major banks, Macquarie Bank and ING Australia.
Licence conditions imposed on HUB24 Super trustee
APRA has imposed additional licence conditions on HTFS Nominees, trustee of the HUB24 Super Fund, following concerns identified during a review of platform-based superannuation trustees.
The regulator identified weaknesses across investment governance, conflict management, investment option oversight and member outcomes processes. Particular concerns included the assessment of new investment options, monitoring frameworks and governance arrangements involving potential conflicts of interest.
HTFS must now appoint an independent expert to review its investment governance framework, develop a remediation plan and reassess the suitability of investment options available on its platform. The trustee is also restricted from onboarding certain high-risk investment options until additional oversight requirements have been satisfied.
Macroprudential settings remain unchanged
APRA has decided to leave its macroprudential settings unchanged following its latest review of financial stability risks.
The regulator will maintain the mortgage serviceability buffer at 3%, keep the countercyclical capital buffer at 1% of risk-weighted assets and retain existing limits on higher debt-to-income lending.
While household and business cashflow pressures remain elevated, APRA noted that arrears and non-performing loans are still relatively low and the banking sector remains well capitalised.
The regulator also observed that higher-risk mortgage lending remains within existing guardrails despite increasing over the past year.
Banking rules to become more proportionate
APRA has confirmed changes to its banking framework aimed at reducing regulatory burden for smaller and mid-sized institutions while maintaining prudential safeguards.
From 1 July 2026, banks will be categorised under a formal three-tier structure, with a new tier created for the largest institutions holding more than $300 billion in assets.
APRA will also increase the threshold for Significant Financial Institution status from $20 billion to $30 billion in assets and introduce an automatic 12-month transition period when a bank moves into a higher regulatory category.
The reforms stem from the Council of Financial Regulators’ review of small and medium-sized banks and are intended to better align regulatory requirements with the size, complexity and risk profile of individual institutions.
The contents of this article do not constitute legal advice and it is not intended to be a substitute for legal advice and should not be relied upon as such. It is designed and intended as general information in summary form, current at the time of publication, for general informational purposes only. You should seek legal advice or other professional advice in relation to any particular legal matters you or your organisation may have.
