The Australian Prudential Regulation Authority (“APRA”) has released for consultation a discussion paper outlining its proposals to introduce a new prudential standard for authorised deposit-taking institutions (“ADI”) that issue covered bonds. The discussion paper is accompanied by a draft of “Prudential Standard APS 121 Covered bonds”. The discussion paper and draft prudential standard aim to ensure that ADIs adopt prudent practices when issuing covered bonds and managing risks associated with exposure to a covered bond special purpose vehicle. Included in this discussion paper, but unrelated to covered bonds, are proposed changes to “Prudential Standard APS 120 Securitisations” to clarify the prudential treatment of holdings of subordinate tranches of securitisations held by an ADI other than the originator of the loans.