The Australian Prudential Regulation Authority has published a response to submissions, a final Prudential Standard APS 113 and a final Prudential Practice Guide APG 113 confirming a new pathway for medium-sized banks to become accredited to use the internal ratings-based approach to calculate credit risk-weighted assets. The revised pathway is intended to make accreditation more flexible and transparent, reducing barriers for medium-sized banks while maintaining the integrity of the approach. Use of the internal ratings-based method allows banks to align capital more closely with their actual credit risk and can reduce capital requirements relative to the standardised approach. Most banks in Australia still use the standardised approach, and APRA has so far approved only six banks to use the internal ratings-based method: the four major banks, Macquarie Bank and ING Bank Australia. The changes implement APRA’s commitment under Action 2 of the Council of Financial Regulators’ Review of Small and Medium-sized Banks to review and streamline the accreditation process as part of broader efforts to increase proportionality and reduce regulatory burden.
Australian Prudential Regulation Authority2026-06-04
Australian Prudential Regulation Authority finalises more accessible internal ratings-based accreditation pathway for medium-sized banks
The Australian Prudential Regulation Authority has finalised Prudential Standard APS 113 and Prudential Practice Guide APG 113, creating a more flexible, transparent pathway for medium-sized banks to gain accreditation to use the internal ratings-based approach for credit risk-weighted assets. The reforms lower accreditation barriers while maintaining model integrity, enabling banks to align capital more closely with actual credit risk and potentially reduce capital requirements relative to the standardised approach, delivering APRA’s commitment to streamline accreditation and increase proportionality for small and medium-sized banks.