APRA announced its decision to keep the countercyclical capital buffer (CCyB) for authorized deposit-taking institutions on hold at zero percent. APRA also published an information paper on CCyB, which notes that APRA is giving consideration to introducing a non-zero default level for the CCyB as part of its broader reforms to the authorized deposit-taking institution capital framework. APRA expects to commence the next stage of its authorized deposit-taking institution capital consultation in the first half of next year. The revised capital framework of APRA is scheduled to come into effect from January 01, 2022.
The CCyB is an additional amount of capital that APRA can require authorized deposit-taking institutions to hold at certain points in the economic cycle to bolster the resilience of the banking sector during periods of heightened systemic risk. It has been set at zero percent of risk-weighted assets since it was introduced in 2016. APRA confirmed it considers that a zero percent CCyB remains appropriate at this point in time based on an assessment of the systemic risk environment for authorized deposit-taking institutions. Among the factors APRA considered in making its decision were:
- Low credit growth
- Minimal change in the risk profile of new housing lending
- Movements in residential property prices, particularly recent growth
- Increased entity costs due to operational risk events and misconduct
In conjunction with the other agencies on the Council of Financial Regulators, APRA will continue to closely monitor financial and economic conditions. APRA reviews the buffer quarterly and may adjust it if future circumstances warrant this.
Keywords: Asia Pacific, Australia, Banking, CCyB, Systemic Risk, Basel III, Regulatory Capital, APRA
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