July 19, 2017

APRA announced its assessment on the additional capital required for the Australian banking sector to have capital ratios that are considered “unquestionably strong.” APRA released an Information Paper that outlines its conclusions on the quantum and timing of capital increases that will be required for Australian authorized deposit-taking institutions to achieve unquestionably strong capital ratios. All authorized deposit-taking institutions are expected to meet the new benchmarks by January 01, 2020.

The analysis draws on international comparisons as well as other information that allows capital strength to be viewed from different perspectives. In its assessment, APRA has focused on the appropriate calibration of common equity tier 1 (CET1) capital requirements, recognizing that CET1 is the highest quality capital and, therefore, most likely to engender confidence in an authorized deposit-taking institution’s financial strength. APRA has distinguished between the authorized deposit-taking institutions using the more conservative standardized approach to capital adequacy and the banks that are accredited to use internal models to determine their capital requirements. The four major Australian banks need to have CET1 capital ratios of at least 10.5% to meet the “unquestionably strong” benchmark. APRA will set prudential standards to achieve this outcome by effectively increasing requirements for all internal ratings-based banks by the equivalent of nearly 150 basis points. For other authorized deposit-taking institutions, the effective increase in capital requirements to meet the “unquestionably strong” benchmark will be about 50 basis points.

 

The 2014 Financial System Inquiry (FSI) endorsed the benefits of a strong and well-capitalized banking system and recommended that APRA set capital standards such that capital ratios of authorized deposit-taking institutions are unquestionably strong. The Australian government subsequently endorsed this recommendation.

 

Related Link: Media Release

Keywords: Asia Pacific, Australia, Banking, CET1, Basel III, Internal Ratings Based, Standardized Approach, APRA

Related Articles
News

FSB to Evaluate Effects of Too-Big-To-Fail Reforms for Systemic Banks

FSB is seeking feedback as part of its evaluation of the effects of the too-big-to-fail reforms for banks.

May 23, 2019 WebPage Regulatory News
News

APRA Releases Minor Changes to Reporting Standards on SA-CCR for Banks

APRA released minor changes to the three reporting standards for the standardized approach for measuring counterparty credit risk exposures (SA-CCR).

May 22, 2019 WebPage Regulatory News
News

APRA on Industry Self-Assessments into Governance and Accountability

APRA released an information paper analyzing the self-assessments performed by 36 of the country’s largest banks, insurers, and superannuation licensees in response to the final report on the Prudential Inquiry into the Commonwealth Bank of Australia (CBA).

May 22, 2019 WebPage Regulatory News
News

PRA Consults on Maintenance of TMTP Under Solvency II

PRA published a consultation paper (CP11/19) that sets out its approach to update supervisory statement (SS6/16) on maintenance of the transitional measure on technical provisions (TMTP) under Solvency II.

May 22, 2019 WebPage Regulatory News
News

APRA Proposes to Amend Guidance on Residential Mortgage Lending

APRA is consulting on revisions to the prudential practice guide APG 223 on residential mortgage lending in Australia.

May 21, 2019 WebPage Regulatory News
News

IASB Proposes Improvements to IFRS 9 and IFRS 16

IASB published the exposure draft ED 2019/2 that proposes amendments to four IFRS standards, including IFRS 9 on Financial Instruments and IFRS 16 on Leases.

May 21, 2019 WebPage Regulatory News
News

Denis Beau of BDF on Supervisory Priorities for Climate-Change Risks

Denis Beau, the First Deputy Governor of BDF, delivered opening remarks at the BCBS-BSCEE-FSI High-level Meeting for Europe on banking supervision.

May 21, 2019 WebPage Regulatory News
News

ISDA CDM to be Deployed for UK Digital Regulatory Reporting Pilot

ISDA announced deployment of the ISDA Common Domain Model (ISDA CDM 2.0) to support the UK FCA, BoE, and participating financial institutions in testing phase two of the Digital Regulatory Reporting pilot for derivatives.

May 21, 2019 WebPage Regulatory News
News

MAS to Consolidate Regulation of Merchant Banks Under Banking Act

MAS published a consultation paper that proposes to consolidate the regulation of merchant banks under the Banking Act and to move merchant banks to a licensing regime under the MAS Act.

May 21, 2019 WebPage Regulatory News
News

ESAs Amend Technical Standards on Mapping of ECAIs Under CRR

ESAs published a second amendment to the implementing technical standards on the mapping of credit assessments of External Credit Assessment Institutions (ECAIs) for credit risk under the Capital Requirements Regulation (CRR).

May 20, 2019 WebPage Regulatory News
RESULTS 1 - 10 OF 3118