Over the last three years, APRA's primary focus in the regulation of banks, building societies and credit unions has been the transition from the old international regulatory standards on bank capital known as Basel I to the new regime, Basel II.Basel II is due to come into effect in Australia from January next year, which means that the first APRA returns under the new standards will be for the January month end - or about six months from now.The problem for all banks is that none of the new standards have yet been issued in final form, leaving APRA a busy few months to get them finalised and an even busier few months after that for banks to get them implemented.For convenience in discussing what is to come I will use the groupings APRA uses when releasing their responses to submissions.Advanced approaches to credit, operational and interest rate risks This section covers the approach that the four major banks, Macquarie, St. George and BankWest are expected to take once they pass APRA's tests for using the advanced approach.In essence, the advanced approach allows banks to calculate their own capital based on their internal modelling of those requirements. APRA issued the latest paper on advanced approaches on 13 June this year, and this covers the new APSs 113 (credit risk), 115 (operational risk) and 117 (interest rate risk) and their associated guidelines (APG 113, 115 and 117).Of the draft APSs the three mentioned above have been the most debated and two of them (115 and 117) are largely complete. Probably all that will happen is that the wording may be updated and the "draft" taken off them. The 13 June paper accepted most of the points made by those who have made submissions on these standards and revised drafts included no real surprises in there.APS 113 on credit risk has a bit more work to be done. There are three main areas of controversy.The first draft of the rules on exposure netting are now a bit overdue. APRA is still not happy with the capital outcome on margin lending - with no capital required under the current draft. APRA also does not believe that a bank can correctly model exposures to related entities, so they are looking at this as well. APRA now does not have much time to deliver the final draft of this standard on credit risk in what is the most complex area of Basel II.APRA has also decided to defer work on the more recent Basel II changes in counterparty credit risk into 2008 as it judges these topics are less critical.Final submissions on credit risk are due by 13 September, giving APRA roughly four months to finalise both the APSs and the associated APGs and allow the banks some time to make any needed internal changes.Standardised approaches to credit and operational risk The "Standardised" approaches are the ones all other ADIs in Australia will use with respect to credit and operational risk. This includes all smaller