The Financial Ombudsman’s latest eNews contains some helpful case studies including its approach to customers in financial difficulty (here), credit card charge backs and whether a stockbroker had a reasonable basis for its advice to consumers to invest in a scheme.

ADI’s which established securitisation arrangements under old APS 120 (Prudential Standard APS 120 Funds Management
and Securitisation made on 30 May 2006 which has been revoked since 31 December 2007) must complete the transition to new APS 120 by 30 June 2010.

If APRA allowed a lower capital requirement or compliance with the old standard that exemption must expire by 30 June 2010. If the arrangement does not comply by 30 June then APRA will impose a higher capital requirement or the ADI can re-document the arrangement so that it does comply with APS 120.

Langes can assist ADI’s with assessing compliance with APS 120.

The Australian Prudential Regulation Authority (APRA) has released for consultation a discussion paper, accompanied by proposed amendments to relevant prudential standards and prudential practice guides (PPGs), on proposals to enhance the Basel II Framework in Australia.

The consultation package is a response to measures released in July 2009 by the Basel Committee on Banking Supervision to enhance the Basel II Framework by ensuring that the risks inherent in banks' portfolios relating to trading activities, securitisations and exposures to off-balance sheet vehicles are better reflected in minimum capital requirements, risk management practices and accompanying public disclosures.

The proposed changes to prudential standards outlined in APRA's discussion paper include:

• higher capital requirements to capture the credit risk of complex trading activities and the introduction of a stressed value-at-risk (VaR) requirement;
• higher risk-weights for so-called 'resecuritisation' exposures to better reflect the risk inherent in these products, and increased credit conversion factors for short-term liquidity facilities provided to off-balance sheet conduits;
• guidance in relation to valuation practices and capture of off-balance sheet and securitisation activities; and
• increased disclosure requirements for securitisations and off-balance sheet exposures.

Although the remuneration changes to APRA APS 510 do not commence until 1 April 2010, in APRA's response to submissions it says it expects immediate compliance:

it is APRA’s expectation that regulated institutions negotiating or renegotiating contracts between the release of the revised governance standards (1 December 2009) and their commencement date will be fully cognisant of APRA’s requirements and will begin the transition during this period for existing arrangements that would not meet the revised standards. Any attempts to circumvent APRA’s requirements during this time will expose the relevant institution to a supervisory response from APRA.

Contracts in force at 1 April 2010 must be fully compliant with the standards at the first opportunity for renegotiation, and in any event by 31 March 2013.

If you don't have a contracts register now is the time to set it up.

It is important to note the wide scope of the persons to whom the standard applies to:

• responsible persons (excluding responsible auditors and non-executive directors);
• risk management, compliance, internal audit and financial control personnel (collectively, ‘risk and financial control personnel’); and
• all other employees or agents for whom a significant portion of total remuneration is variable and determined by performance measures. A person need not be an employee of the regulated institution to be covered, and may be an employee of a subsidiary or otherwise related company, a consultant, a contractor or an agent. It can cover persons such as commissioned sales personnel and third party intermediaries such as agents, loan brokers, insurance brokers and financial planners.

Langes Lawyers have prepared an APS510 remuneration checklist. LCAP Members can download it here.

Contact us if you need assistance with drafting or reviewing your agreements or developing your Remuneration Committee charter or remuneration policy.