APRA proposes to recognise substituted compliance for seven foreign jurisdictions

On 9 May 2017, the Australian Prudential Regulation Authority (APRA) released for consultation a draft Prudential Standard CPS 226 Margining and risk mitigation for non-centrally cleared derivatives (CPS 226). Click here for the proposed draft CPS 226 and APRA's letter to all APRA-regulated institutions other than private health insurers.

The draft CPS 226 proposes to recognise substituted compliance for seven foreign jurisdictions by providing that the margin requirements in CPS 226 do not apply to transactions in which an APRA covered entity complies with the relevant foreign margin requirements or provisions set out in Attachment D of CPS 226 in their entirety.

Attachment D of the draft CPS 226 sets out the following foreign bodies in relation to which substituted compliance is permitted:

• Canada – Office of the Superintendent of Financial Institutions;
• European Commission;
• Hong Kong – Hong Kong Monetary Authority;
• Japan – Financial Services Agency;
• Japan – Ministry of Agriculture, Forestry and Fisheries;
• Japan – Ministry of Economy, Trade and Industry;
• Singapore – Monetary Authority of Singapore;
• Switzerland – Swiss Financial Market Supervisory Authority;
• United States – Commodity Futures Trading Commission;
• United States – Farm Credit Administration;
• United States – Federal Deposit Insurance Corporation;
• United States – Federal Housing Finance Agency;
• United States – Board of Governors of the Federal Reserve System; and
• United States – Office of the Comptroller of the Currency, Treasury,

subject to a condition relating to intra-group transactions in the case of certain jurisdictions.

The draft CPS 226 also proposes to amend CPS 226 paragraph 45(b) relating to eligible collateral.

APRA has invited written submissions on the proposed amendments to CPS 226 by 6 June 2017.