APRA's approach to the supervisory review process under Basel II

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.