The Australian Prudential Regulation Authority is planning to write some new standards for ADIs, focusing on liquidity and securitisation, in response to its discovery of unexpected vulnerabilities exposed by the global financial crisis.APRA executive general manager policy, research and statistics, Charles Litrell, said the regulator's practice had been to look at issues to do with the market's confidence in an ADI but now it had to look at what happens when a market "disappears".Speaking at last week's Australian Debt Market Conference in Sydney, Litrell said: "We don't plan any major changes to our supervisory practices flowing from recent financial market learning. This learning will instead feed into our ongoing improvement work and you should expect to see more focus on liquidity issues."APRA has formed an industry advisory group, and has moved into a formal rule-making process and expects to release draft rulings later this year.Litrell said: "We have discovered that our current arrangements don't allow APRA to form an immediate and fully comparable view of a given ADI's liquidity or the industry's liquidity."We have also discovered that our current information collection is too focused upon the past and present, and insufficiently serves the future."We need the ability to source a pre-defined short-term liquidity position from larger ADIs within a few hours."As for the prudential standard, we will need to expand our scenario approach from the current five-day rules to include scenarios of market failure."The intention is that ADIs should be able to survive reasonably foreseeable adversity using their own resources, without relying on ad hoc public sector support."Litrell said APRA was also planning to work with industry on procedures for managing a run on a retail bank. APRA is not sure it has the necessary contingency plans in place to deal with a Northern Rock situation.The Basel Committee was also working on liquidity rules and these would be rolled into APRA's project.Other overseas work that APRA was looking at was the Bank of International Settlements' Financial Stability Forum review of the causes of the credit crunch. Litrell said: "The FSF paper devoted considerable attention to the originate-to-distribute model and the potential risks associated with this model. This has caused APRA to think harder about some of its securitisation rules."My expectation is that we will maintain our generally favourable stance on allowing capital concessions on properly structured transactions but the definition of properly structured might become a bit tighter."We've been reminded that banks are fragile, in both their leverage and their reliance on public confidence, and that only ceaseless and high quality vigilance prevents their failure."This vigilance must come primarily from within banks but regulators must be ready to intervene early if a bank is going astray."