The
Australian Prudential Regulation Authority (APRA) has released an
information paper on its approach to the supervisory review process
under the new Basel II capital adequacy regime, known as the Basel II
Framework. This follows the release, on 30 November 2007, of the full
suite of prudential standards that will give effect to the
implementation of Basel II in Australia.

The
supervisory review process, or Pillar 2, is one of three mutually
reinforcing pillars on which the Framework is based. The review process
is intended to ensure that locally incorporated authorised
deposit‑taking institutions (ADIs) have adequate capital to support all
the risks in their business and to encourage ADIs to develop and use
better risk management techniques in monitoring and managing their
risks.

The Basel II Framework will come into force in Australia on 1 January 2008.