Regulatory AlertsAPS 117 Capital Adequacy: Interest Rate Risk in the Banking Book
APRA issued Prudential Standard APS 117 to require authorised deposit-taking institutions to prudently manage, measure, and monitor interest rate risk in the banking book commensurate with their operations. The standard mandates that Significant Financial Institutions maintain robust governance frameworks, including board oversight and senior management accountability, while establishing specific criteria for obtaining and maintaining approval to use internal models for calculating capital charges. It further prescribes detailed requirements for measurement systems, data integrity, stress testing, and reporting to ensure adequate capital is held against potential earnings and economic value losses from interest rate fluctuations.
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