APRA publishes FAQs on Prudential Standard APS 120 Securitisation

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APRA publishes FAQs on Prudential Standard APS 120 Securitisation

APRA publishes FAQs on Prudential Standard APS 120 Securitisation

Sep 17 2021

In late August, the ASF coordinated an industry response to the Australian Prudential Regulation Authority (APRA) on key issues arising from APRA’s review of ADI compliance with APS 120. These issues included increases in yields and buy back obligations.  Following consideration of the arguments and views put forward in the ASF submission, APRA has provided greater clarity as to when such features are, and are not, likely to be compliant with APS 120.

APRA published on their website a new set of FAQs on 15 September to discuss these particular issues. In the FAQs, APRA has reiterated that an increase in yield payable to investors that is linked to a deterioration in the credit quality of securitised loans is not viewed as being compliant.  However other increases in the margin not related to credit performance can be compliant.  APRA also restated their view that a mandatory obligation to buy back loans is not compliant however they acknowledge that buy backs can occur in certain circumstances for performing borrowers where the lender has agreed to changes to the loan or security.

APRA website: Securitisation – frequently asked questions 

To further discuss this matter contact Chris Dalton or Robert Gallimore.