On 4 June 2026, the Australian Prudential Regulation Authority (APRA) published a letter that responds to submissions to its consultation on a new pathway to internal ratings-based (IRB) accreditation.
APRA has also published the final revised Prudential Standard APS 113 Capital Adequacy: Internal Ratings-based Approach to Credit Risk (APS 113) and Prudential Practice Guide APG 113 Capital Adequacy: Internal Ratings-based Approach to Credit Risk (APG 113).
Changes in light of industry feedback
The letter confirms APRA’s intention to proceed with the changes, which will make IRB accreditation more attainable for medium-sized authorised deposit taking institutions (ADIs).
The letter also notes that in response to industry feedback:
- APRA will allow ADIs to phase in the interest rate risk in the banking book (IRRBB) capital charge as part of the phased approach to IRB accreditation. The new pathway provides ADIs with additional flexibility to meet the required standards gradually over a three-year period while realising the associated capital benefits at each phase of the process.
- APRA has provided additional guidance on its expectations, and clarified the engagements an ADI can expect, throughout the accreditation process. Where necessary APRA will provide further clarification of its IRB expectations, particularly regarding ADI-specific matters, directly to applicants to support informed decision-making. Details on specific comments raised in submissions and APRA’s response are provided in Attachment A to APRA’s letter.
- Following the Additional Tier 1 reforms, IRB ADIs will continue to hold capital above Basel minimums. To maintain an incentive to pursue IRB accreditation, APRA will take into account the 25 basis points increase in the additional IRB capital requirement when calibrating the Pillar 2 adjustment of medium-sized ADIs that are accredited after 1 January 2027. APRA will discuss this adjustment with individual IRB applicants, while retaining full discretion to apply Pillar 2 add-ons for other risks as required.
Next steps
The effective date of the revised APS 113 and APG 113 is 30 June 2026.