Glossary of Terms & Acronyms – Sector Outlook

Glossary of acronyms applicable to the Australian banking sector


ADI Authorised deposit-taking  institution
AIFRS Australian equivalents to International Financial Reporting Standards
ANZ Australia and New Zealand Banking Group Limited
APRA Australian Prudential Regulation Authority
APRA Act Australian Prudential Regulation Authority Act 1998
APS APRA Prudential Standard for ADIs
ASIC Australian Securities and Investments Commission
ATO Australian Taxation Office
BEAR Banking Executive Accountability Regime
CBA Commonwealth Bank of Australia
CCR Counterparty Credit Risk
CET1 Common Equity Tier 1
CFR Council of Financial Regulators
CLF Committed Liquidity Facility
CPS APRA Cross-industry Prudential Standard
D2A Direct to APRA
FCS Financial Claims Scheme
FSI Financial System Inquiry
LCR Liquidity Coverage Ratio
MoU Memorandum of Understanding
NAB National Australia Bank
NOHC Non-Operating Holding Company
NSFR Net Stable Funding Ratio
PHI Private health insurers
PPF Purchased payment facility
RBA Reserve Bank of Australia
RSE Registrable Superannuation Entity
SME Small-to-Medium Enterprise
WBC Westpac Banking Corporation

Sources: APRA (2017), Gen Advisory research (2019)

Glossary of terms applicable to the Australian banking sector


ADI refers to an authorised deposit-taking institution, meaning a body corporate authorised under section 9 of the Act, to carry on banking business in Australia (e.g. a bank, building society or credit union).

AIFRS refers to the Australian equivalents of International Financial Reporting Standards.

AIRB refers to an advanced internal-ratings based approach to credit risk, as defined in Prudential Standard APS 113 Capital Adequacy: Internal Ratings- based Approach to Credit Risk (APS 113).

AMA refers to an advanced approach used to measure an ADI’s regulatory capital for operational risk.

Australian-owned ADI refers to an ADI that is not a foreign-owned ADI.

Authorised NOHC has the same meaning as in the Banking Act 1959.

Banking Act refers to the Banking Act 1959.

Board refers to the Board of directors of an institution.

Common Equity Tier 1 Capital is as defined in APS 111.

Conglomerate group is a group of companies that are related to each other within the meaning of section 50 of the Corporations Act 2001 where the group includes one or more ADIs that have been incorporated within Australia.

Corporate finance activities includes underwriting and any holdings of equity or debt arising from underwriting, arranging, facilitation, and management activities such as those associated with securitisation, mergers and acquisitions or privatisations and syndication activities that are undertaken, predominantly, with the intention of earning a fee. Corporate finance activities also includes longer term positions in equities that are held for strategic reasons and holdings in equity instruments, or in instruments that exhibit characteristics that are more like equity than debt, that arise as a consequence of loan restructurings.

Corporations Act refers to the Corporations Act 2001.

Credit rating grades means grades of credit ratings to which ECAI ratings are mapped, and that correspond to relevant asset risk weights.

External Credit Assessment Institution (ECAI) means an entity that assigns credit ratings designed to measure the creditworthiness of a counterparty or certain types of debt obligations of a counterparty.

Financial institution includes any institution engaged substantively in one or more of the following activities – banking; leasing; issuing credit cards; portfolio management (including asset management and funds management); management of securitisation schemes; equity and/or debt securities, futures and commodity trading and broking; custodial and safekeeping services; insurance (both general and life) and similar activities that are ancillary to the conduct of these activities. A financial institution includes any authorised NOHC or overseas equivalent.

Foreign ADI has the meaning in section 5 of the Act.

Foreign-owned ADI means an ADI in relation to which an approval has been given, under section 14 of the Financial Sector (Shareholdings) Act 1998, for a bank that is not locally incorporated to hold a stake of more than 15 per cent in the ADI.

FSCODA refers to the Financial Sector (Collection of Data) Act 2001.

General market risk means the risk of loss owing to changes in the general level of market prices or interest rates. It arises from positions in interest rate, equities, foreign exchange and commodities.

Gross income means total operating income from continuing operations.

Group refers to a corporate group that comprises more than one company that are related bodies corporate within the meaning of section 50 of the Corporations Act.

Internal Capital Adequacy Assessment Process (ICAAP) is as defined in Prudential Standard APS 110 Capital Adequacy (APS 110).

Internal ratings-based (IRB) approach to credit risk refers to the approach to credit risk, as defined in APS 113.

IRB approval refers to the written approval from APRA for an ADI to adopt the IRB approach.

IRRBB means interest rate risk in the banking book: the risk of loss in earnings or in the economic value on banking book items as a consequence of movements in interest rates.

Legal risk includes, but is not limited to, exposure to fines, penalties or punitive damages resulting from supervisory actions as well as ordinary damages in civil litigation, related legal costs and private settlements.

Listed refers to an institution admitted to, and not removed from, a stock exchange.

LMI refers to lenders mortgage insurer or lenders mortgage insurance.

Locally-incorporated ADI refers to an ADI that is incorporated in Australia or in a State or Territory of Australia, by or under Commonwealth, State or Territory legislation.

Mark-to-model refers to any valuation that has to be benchmarked, extrapolated or otherwise calculated from a market input.

Material currency means a currency for which the total book value of an ADI’s banking book items in that currency is more than five per cent of the total book value of all banking book items. In determining whether a currency is material, the effect of currency hedges that reduce foreign currency exposure may be taken into account, provided those hedges are effective.

Model approval refers to the written approval from APRA to an ADI to adopt an internal model approach to a particular risk.

Net credit balance has the meaning in section 5 of the Act.

Netting refers to the process under a netting agreement of combining all relevant outstanding transactions between two counterparties and reducing them to a single net sum for a party to either pay or receive.

Non-Operating Holding Company (NOHC) has the meaning in section 5 of the Act.

Normal settlement period means a contractual settlement period that is equal to or less than the market standard for the instrument underlying the transaction and, in any case, less than five business days.

Offshoring means the outsourcing by an ADI of a material business activity associated with its Australian business to a service provider (including a related body corporate) where the outsourced activity is to be conducted outside Australia.

Operational risk means the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events. This definition includes legal risk1 but excludes strategic and reputational risks.

Ordinary shares for Regulatory Capital purposes must meet the criteria in Attachment B to APS 111.

Prudential Capital Requirement (PCR) means the minimum amount of Regulatory Capital that an ADI or NOHC must hold.

PPF provider or purchased payment facility provider refers to an ADI with authority to provide purchased payment facilities.

Privacy Act refers to the Privacy Act 1988.

Prudential disclosures means the minimum requirements relating to the disclosure by an ADI of information about its capital adequacy under Prudential Standard APS 330 Capital Adequacy: Public Disclosure of Prudential Information.

Prudential requirements includes requirements imposed by the Act, prudential standards made under the Act, reporting standards made under FSCODA, conditions on the ADI’s authorisation and any other requirements imposed by APRA in writing.

Regulatory Capital is as defined in APS 111.

Related body corporate, or related company, has the meaning in section 50 of the Corporations Act.

Relevant group of bodies corporate has the meaning in section 5 of the Act.

Risk management declaration is as defined in Prudential Standard CPS 220 Risk Management (CPS 220).

Securitisation is a financing structure where the cash flow from a pool is used to make payments on obligations to at least two tranches or classes of creditors (typically holders of debt securities), with each tranche or class entitled to receive payments from the pool before or after another class of creditors, thereby reflecting different levels of credit risk.

Senior manager has the meaning in section 5 of the Act.

Senior officer outside Australia is the senior nominated officer of a foreign ADI (whether a director or senior executive) outside Australia with delegated authority from the Board to be responsible for overseeing the Australian branch operation.

Standardised Approach to credit risk refers to the approach to credit risk outlined in Prudential Standard APS 112 Capital Adequacy: Standardised Approach to Credit Risk (APS 112).

Subsidiary has the meaning in the Corporations Act.

Tier 1 Capital is as defined in APS 111.

Tier 2 Capital is as defined in APS 111.

Third party means an entity that is not the ADI or a related body corporate of the ADI.

Total Capital is as defined in APS 111.

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