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KEY REGULATORY CHANGES IMPACTING CAPITAL AND FUNDING Fundamental Review of the Trading Book & Credit Valuation Adjustment (CVA) Net Stable Funding Ratio (NSFR) Leverage Ratio Revised standardised approach to credit risk & internal model approaches to credit risk Capital Floors Total Loss Absorbing Capacity (TLAC) & Resolution Revised standardised approach to operational risk Interest Rate Risk in the Banking Book (IRRBB) Securitisation Description Aims to replace current trading book capital rules with a more coherent and consistent framework. The proposed CVA risk framework takes into account the market risk exposure component of CVA along with its associated hedges Aims to improve resilience in the banking sector by requiring banks to balance the amount of 'stable' assets they have on their balance sheet with the amount of 'stable' funding A non-risk based supplementary measure to the risk-based capital requirements Refresh of standardised credit risk standards to reduce RWA variability and strengthen the existing regulatory capital standard. BCBS proposed changes to the internal ratings-based approaches (IRB) and adoption of model- parameter floors for credit risk A capital floor based on standardised approaches for credit and market risk. This may limit the influence of internal ratings-based models Enhanced loss-absorbing and recapitalisation capacity of banks in resolution. Initially intended for G-SIBS, but is expected for Australian D-SIBS. The TLAC holdings standard has been issued by BCBS, covering capital deductions for holding TLAC instruments Proposed revisions to standardised approach for operational risk removes the advanced measurement approaches and introduces a standardised measurement approach to calculate operational risk, using financial statement information and internal loss experience Sets supervisory expectations for banks' identification, measurement, monitoring and control of IRRBB as well as its supervision; via an enhanced Pillar 2 approach APRA proposal seeks to simplify securitisation for originating ADIs, and incorporate the updated BCBS securitisation framework International regulation status Final Basel Committee on Banking Supervision (BCBS) standard for FRTB released January 2016 Final BCBS standard released October 2014 Consultation released April 2016 Standardised: Second BCBS consultation released December 2015 IRB: BCBS consultation released March 2016 First BCBS consultation released December 2014 Financial Stability Board (FSB) final standards issued in November 2015 Second BCBS consultation released March 2016 Domestic regulation status Future APRA consultation expected APRA industry consultation released September 2016 Disclosure requirements implemented, minimum requirement to be determined Future APRA consultation expected Future APRA consultation expected Future APRA consultation expected, structure and timing of implementation currently unknown Future APRA consultation expected Final BCBS standard released April 2016 Future APRA consultation expected Final BCBS standard released December 2014 APRA industry consultation commenced November 2015 102 National Australia Bank KEY REGULATORY CHANGES IMPACTING CAPITAL AND FUNDING EXPECTED TIMELINES 103 Fundamental Review of the Trading Book (FRTB) FSI Response Internal Model Approaches to Credit Risk Revised Standardised Approach to Credit Risk Standardised Measurement Approach to Operational Risk Capital Floors Sovereigns Interest Rate Risk in the Banking Book (IRRBB) Securitisation Total Loss Absorbing Capital (TLAC) Net Stable Funding Ratio (NSFR) Leverage Ratio 2016 Final BCBS standard released Implementation of mortgage risk weights BCBS consultation on revision BCBS consultation on revision BCBS consultation on revision BCBS consultation expected Final BCBS standards released APRA consultation APRA consultation BCBS consultation 2017 2018 2019 APRA consultation expected Implementation expected APRA guidence expected APRA consultation expected Final BCBS standards expected Final BCBS standards expected Final BCBS standards expected Final BCBS standards expected APRA consultation expected APRA consultation expected APRA consultation expected BCBS consultation expected Implementation to be advised APRA consultation expected Implementation Implementation APRA consultation expected Implementation to be advised Implementation BCBS final calibration expected APRA consultation expected Implementation National Australia Bank

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