December 07, 2017

APRA released the annual Information Paper on the countercyclical capital buffer (CCyB). CCyB is designed to raise banking sector capital requirements in periods where excess credit growth is judged to be associated with the build-up of systemic risk. APRA is maintaining CCyB at 0%.

The paper contains an update on the setting of the buffer and on the levels of a set of core indicators of systemic risks associated with the financial cycle. APRA reviews the level of the countercyclical capital buffer on a quarterly basis, based on forward-looking judgments around credit growth, asset price growth, and lending conditions, as well as evidence of financial stress. This decision to maintain the buffer at zero takes into account APRA’s supervisory activities and prudential measures, particularly on housing lending standards and the establishment of benchmarks on investor lending growth and interest-only lending. APRA considers the quality of lending is improving and is working to ensure improved standards are firmly embedded into industry practice.

APRA will continue to closely monitor developments, including but not limited to movements in the core risk indicators and will adjust the buffer level if conditions warrant it in future. An announcement to increase the buffer may have up to twelve-month notice before the new buffer comes into effect; any subsequent decision to reduce the buffer will generally be effective immediately.

 

Related Link: Annual Information Paper on CCyB (PDF)

Keywords: Asia Pacific, Australia, Banking, CCYyB, Capital Requirements, APRA

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