2 Policy & Supervisory Settings (APRA/APG 223)

I start with prudential rules relating to mortgage lending. Coming from Ireland I am familiar with the macroprudiential rules set out there. I had to get an understanding of risk management, debt limits and stress tests in Australia. Like much of the globe Irish macroprudential rules were driven post 2008. Australia underwent a similar process.

Australia entered the 2010s with household debt at historically high levels and mortgage lending standards that, while varied across institutions, increasingly relied on optimistic serviceability assumptions and minimal verification for certain borrower groups. The Reserve Bank of Australia (RBA) itself noted that loans with low documentation and investor-heavy exposures had proliferated prior to the Global Financial Crisis, creating risks that were only partially absorbed by higher capital standards RBA - Financial Stability Review (October 2015). Such factors lead to The Australian Prudential Regulation Authority (APRA) releasing the Prudential Practice Guide APG 223 in late 2014 as a baseline for consistent underwriting, verification, and stress testing across all authorised deposit-taking institutions.