APRA's view on securitisation of assets for contingent liquidity purposes

APRA has written to ADI's giving its view on ADIs seeking to securitise a portion of their loan portfolio specifically to create mortgage-backed securities that are eligible for repurchase agreement (repo) transactions with the Reserve Bank of Australia (RBA).

APRA’s understanding is that ADIs intend to hold all of the securities issued by the securitisation vehicle until needed in obtaining liquidity from the RBA.

APRA has agreed that the proposed structures can be designed to meet APRA’s prudential requirements, subject to the provisions outlined in its letter and the conditions under which the RBA will accept these securities.

The ADI is expected to treat the entire pool of securitised loans as on-balance sheet assets for capital adequacy purposes under APRA’s Prudential Standard APS 120 Securitisation, Attachment B paragraph 23.

At this point however, APRA does not consider the securities issued under such structures to constitute part of the ADI’s liquid assets.