Regulatory AlertsAPS 117 Capital Adequacy: Interest Rate Risk in the Banking Book
The Australian Prudential Regulation Authority issued Prudential Standard APS 117 to require authorized deposit-taking institutions to obtain approval for their internal models and maintain robust frameworks for managing interest rate risk in the banking book. The standard mandates that institutions establish comprehensive governance, measurement systems, and stress testing protocols to monitor earnings at risk and economic value sensitivity commensurate with their operational complexity. It further specifies capital charge calculation requirements, reporting obligations to the Board, and conditions for partial model usage or regulatory discretion regarding foreign entities and non-significant financial institutions.
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