The Australian Prudential Regulation Authority (APRA) released a consultation package on July 10, 2026, covering proposed minor amendments to its prudential and reporting framework for authorised deposit-taking institutions (ADIs), general, life, and private health insurers, and registrable superannuation entity (RSE) licensees. Submissions close August 21, 2026. Framed as a technical housekeeping exercise across 10 prudential standards, 15 reporting standards, and two prudential practice guides, the package contains at least three items with direct operational implications that go beyond routine drafting corrections.
The most significant item for ADIs concerns APS 120 Securitisation. APRA proposes to raise the credit conversion factor (CCF) for undrawn servicer cash advances from 0% to 10% – not as a policy change, but as a correction. According to the consultation letter, the 0% unconditionally cancellable CCF was removed under the Basel III framework, but the corresponding amendment to APS 120 was “inadvertently omitted” from a prior package of consequential changes. The gap was only identified because the Basel Committee’s Regulatory Consistency Assessment Programme (RCAP) is currently reviewing Australia’s leverage ratio implementation. Assessments of the leverage ratio framework and Basel III revisions to risk-weighted assets under the RCAP started in 2025, according to the Basel Committee on Banking Supervision.
This is not the first time an RCAP review has identified gaps in APRA’s implementation of Basel standards. A post-assessment follow-up report published by the Basel Committee noted several instances where APRA had rectified omissions identified through the RCAP process. For ADI capital and treasury teams, the practical effect of the APS 120 amendment is an increase in the exposure amount of affected off-balance sheet securitisation positions, with a flow-on to the leverage ratio calculation.
Two amendments directly affect how general and private health insurers calculate their insurance risk charges under the standard method. APRA proposes to amend GPS 115 Capital Adequacy: Insurance Risk Charge – and its private health equivalent, HPS 115 – to make explicit that the risk charge for each class of business cannot fall below zero. This applies to both outstanding claims risk and premiums liability risk. The APRA consultation letter describes the current wording as suggesting a sub-zero outcome is possible, calling it “an anomalous outcome that is inconsistent with the policy intent of the provision.”
The significance is in capital modelling. A negative risk charge would theoretically reduce an insurer’s prescribed capital amount (PCA), creating an artificial capital benefit that the standard was never intended to permit. The amendment forecloses that outcome explicitly. The number of licensed general insurance entities was steady at 87 across all quarters of 2025, according to APRA’s quarterly statistics – all subject to GPS 115 for classes where an approved internal method is not in use. A prior round of minor framework updates had already addressed a separate issue in HPS 115, with those modifications taking effect on January 1, 2026.
A proposed amendment to GPS 114 Capital Adequacy: Asset Risk Charge introduces a 20-business-day grace period after an annual balance date for insurers to arrange collateral, guarantees, or letters of credit supporting reinsurance recoverables from non-APRA-authorised reinsurers – where those recoverables have increased since the previous balance date. The change applies from the second annual balance date following the event giving rise to the recoverables. A parallel amendment is proposed for HPS 114.
The origin of this provision is documented. During APRA’s separate consultation on the general insurance reinsurance framework, one submission suggested introducing an eight-week grace period after the balance date to allow collateral for certain reinsurance recoveries to be put in place, noting this would reduce compliance burden and avoid technical breaches without materially increasing risk. APRA committed to consult on this suggestion as part of its 2026 minor prudential framework updates process.
The grace period arrives as APRA finalises a broader overhaul of the GI reinsurance framework. APRA’s general insurance reinsurance framework had not been updated since it came into force in 2013, and the regulator has pursued a two-round consultation process to modernise it. APRA Member Suzanne Smith said of the broader reinsurance reforms: “The amendments modernise the prudential framework and give insurers greater flexibility to access reinsurance arrangements, while maintaining appropriate safeguards for policyholders.”
The minor updates process has run annually since June 2023 as part of APRA’s effort to keep the framework current without large-scale reviews. The July 2026 round lands as APRA operates under explicit government direction to reduce compliance costs. In July 2025, APRA and many other regulators received a letter from the Treasurer and Minister for Finance seeking specific, measurable actions to reduce compliance costs, without compromising safety and stability objectives. APRA’s response identified nine initiatives. The grace period and several other amendments in this package sit within that context.
APRA currently supervises institutions holding approximately $9.8 trillion in assets for Australian depositors, policyholders, and superannuation fund members. APRA expects to finalise the package in November 2026, with most changes effective from January 1, 2027. Written submissions should be directed to [email protected] by August 21, 2026.
