Australia: APRA releases further consultation package on Level 3 group framework


APRA has released for consultation clarification to the governance and risk management components of the framework for supervision of Level 3 groups. Time to lodge comments on these clarifications closes on 13 May 2016. The new standards will come into effect on 1 July 2017.

As part of this process, APRA has also released for consultation two draft prudential practice guides; 3PG Aggregate Risk Exposures and 3PG 222 Intra-Group Transactions and Exposures. Both have previously been published in August 2014 but excluded from all prior Level 3 group consultations. The time to lodge comments for these guides closes on 27 May 2016.

APRA has deferred implementation of the Level 3 Group prudential capital standards.  Further consultation on these standards will now happen post mid 2017.  This is to allow these standards to be developed alongside the FSI recommendation on unquestionably strong capital ratios for ADIs, loss absorption and recapitalisation capacity and the proposed strengthening of APRA's crisis management powers. Implementation of these standards will not occur before 2019.


APRA's Level 3 Group Framework, to which these standards relate, is in respect of the supervision of conglomerate groups operating in the financial services industry.  APRA categorises these as "Level 3 groups", which are corporate groups whose operations span multiple APRA regulated industries (or include material non-APRA-regulated operations).  This is a further step in APRA's desire to harmonise prudential standards across the financial services industry and to adequately supervise aggregate exposure across Level 3 groups as well as intra-group transactions and risks.


As a result of the deferment of the capital components it has been necessary for APRA to adjust the remaining standards that become operational on 1 July 2017.  The adjustments are relatively minor and reflect:

  1. necessary edits to accommodate 3PS 110 Capital Adequacy not being finalised;
  2. clarifications in respect of the Head of a group in the cross industry prudential standards;
  3. changes to Board requirements resulting from the October 2014 consultation on "Improving APRA's board engagement"; and
  4. changing the timeline for submitting the annual risk declaration required pursuant to CPS 220 Risk Management in response to industry feedback.

Notwithstanding 3PS 110 not being finalised, APRA has advised that it will still implement the limitations on activities of a non-operating holding company that were contained in the draft 3PS 110. These will now be implemented by way of a direct update to the authorisation held by each NOHC.

The impacted standards are:

  1. 3PS 001: Definitions
  2. 3PS 221: Aggregate Risk Exposure
  3. 3PS 222: Intra-group Transactions and Exposures
  4. 3PS 310: Audit and Related matters
  5. CPS 220: Risk Management
  6. CPS 231: Outsourcing
  7. CPS 232: Business Continuity Management
  8. CPS 510: Governance
  9. CPS 520: Fit and Proper


APRA has now opened a consultation process in respect of the two draft prudential practice guides; 3PG 221 Aggregate Risk Exposures and 3PG 222 Intra-Group Transactions and Exposures. Originally released in August 2014 these guides establish APRA's view of sound practice in these specific areas and compliment 3PS 221 Aggregate Risk Exposures as set out in the table below:




3PG 221

Guidance on the aggregate risk exposures policy and how these processes integrate with the group's risk management framework, such as including the aggregate exposure limits in the group risk appetite statement.

Development and maintenance of aggregate risk data capabilities to ensure that the data is of sufficient quality to enable the effective risk management of a level 3 group's risk profile and support risk based decision making.

Risk reporting to ensure timely, accurate, comprehensive, clear and useful reporting is developed in respect of group aggregate risks.

3PG 222

Guidance on managing intra-group transactions and exposures (ITE) focusing on the ITE policy and integrating it with the group risk management framework

Development and maintenance of Intra-group data capabilities to ensure that the data is of sufficient quality to enable the effective management of a Level 3 group's risk profile

Risk reporting to ensure timely, accurate, comprehensive, clear and useful reporting is developed in respect of ITEs


Only a small window for consultation has been allowed as submissions on the clarification are due by 13 May 2016.  The draft prudential standards commence on 1 July 2017.

Submissions on the previously published practice guides close on 27 May 2017.

We are available to assist you or provide you with further information on any of the aspects of the Level 3 framework or APRA's consultation package. Please contact a member of our team listed in this publication. 

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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