APRA announced temporary changes to its expectations regarding bank capital ratios, to ensure banks are well-positioned to continue to provide credit to the economy in the current challenging environment. APRA is advising all banks that they may need to utilize some of their current large buffers to facilitate ongoing lending to the economy. This is especially the case for banks wishing to take advantage of new facilities announced by the Reserve Bank of Australia, or RBA, to promote the continued flow of credit. Provided banks are able to demonstrate they can continue to meet their various minimum capital requirements, APRA would not be concerned if they were not meeting the additional benchmarks announced in 2017 during the period of disruption caused by COVID-19.
APRA, in 2017, had set benchmark capital targets for banks to enable them to be regarded internationally as unquestionably strong (which was a recommendation of the 2014 Financial System Inquiry). These benchmarks are well above the current minimum regulatory requirements. For the four major banks, for example, this benchmark equated to having a common equity tier 1 (CET1) ratio of at least 10.5% of the risk-weighted assets. A lower benchmark applies for smaller banks. In comparison, the actual CET1 ratio of the banking system by the end of 2019 had reached 11.3%. Over the past decade, the Australian banking system has built up substantial capital buffers. CET1, which is the highest-quality form of capital, reached $235 billion at the end of 2019. As a result, banks are typically maintaining capital levels well above the minimum regulatory requirements.
Related Link: Press Release
Keywords: Asia Pacific, Australia, Banking, COVID 19, CET 1, Basel III, Regulatory Capital, APRA
Previous ArticleUS Agencies Revise Definition of Eligible Retained Income for Banks
The European Commission (EC) published the Delegated Regulation 2022/786 with regard to the liquidity coverage requirements for credit institutions under the Capital Requirements Regulation (CRR).
The European Banking Authority (EBA) published the final draft regulatory technical standards specifying the criteria to identify shadow banking entities for the purposes of reporting large exposures.
The Office of the Superintendent of Financial Institutions (OSFI) published the strategic plan for 2022-2025 and the departmental plan for 2022-23.
The European Banking Authority (EBA) is consulting, until August 31, 2022, on the draft implementing technical standards specifying requirements for the information that sellers of non-performing loans (NPLs) shall provide to prospective buyers.
The European Council and the Parliament reached an agreement on the revised Directive on security of network and information systems (NIS2 Directive).
The European Banking Authority (EBA) published the final draft regulatory technical standards specifying information that crowdfunding service providers shall provide to investors on the calculation of credit scores and prices of crowdfunding offers.
The European Council published a draft Commission Delegated Regulation to amend the regulatory technical standards on specification of the calculation of specific and general credit risk adjustments.
The European Securities and Markets Authority (ESMA) published a paper that examines the systemic risk posed by increasing use of cloud services, along with the potential policy options to mitigate this risk.
The Monetary Authority of Singapore (MAS) published amendments to Notice 635, which sets out requirements that a bank in Singapore has to comply with when granting an unsecured non-card credit facility to individuals.
The European Commission (EC) published a public consultation on the review of revised payment services directive (PSD2) and open finance.