General Information & Client Service
  • Americas: +1.212.553.1653
  • Asia: +852.3551.3077
  • China: +86.10.6319.6580
  • EMEA: +44.20.7772.5454
  • Japan: +81.3.5408.4100
Media Relations
  • New York: +1.212.553.0376
  • London: +44.20.7772.5456
  • Hong Kong: +852.3758.1350
  • Tokyo: +813.5408.4110
  • Sydney: +61.2.9270.8141
  • Mexico City: +001.888.779.5833
  • Buenos Aires: +0800.666.3506
  • São Paulo: +0800.891.2518
November 08, 2018

APRA proposed changes to the application of the capital adequacy framework for authorized deposit-taking institutions to support orderly resolution in the unlikely event of failure. The consultation period ends on February 08, 2019. In addition to the proposals outlined in this discussion paper, APRA intends to consult on a framework for recovery and resolution in 2019, which will include further details on resolution planning.

The proposals would ensure authorized that deposit-taking institutions have adequate financial resources available to support orderly resolution in the highly unlikely event of failure. This will be achieved by adjusting, where appropriate, an authorized deposit-taking institution's Total Capital requirement. APRA is proposing an approach on loss-absorbing capacity that is simple, flexible, and designed with the distinctive features of the Australian financial system in mind; the approach has been developed in collaboration with the other members of the Council of Financial Regulators. The key features of the proposals include the following:

  • For the four major banks—increasing Total Capital requirements by four to five percentage points of risk-weighted assets 
  • For other authorized deposit-taking institutions—likely no adjustment, although a small number may be required to maintain additional Total Capital depending on the outcome of resolution planning

The Australian government’s 2014 Financial System Inquiry (FSI) recommended that APRA should implement a framework for loss-absorbing and recapitalization capacity, in line with the emerging international practices, sufficient to facilitate the orderly resolution of Australian authorized deposit-taking institutions and minimize taxpayer support. The government supported this recommendation in its response to FSI. As authorized deposit-taking institutions will be able to use any form of capital to meet increased Total Capital requirements, APRA anticipates the bulk of additional capital raised will be in the form of tier 2 capital. The proposed changes are expected to marginally increase each major bank’s cost of funding—incrementally over four years—by up to five basis points, based on current pricing. This is not expected to have an immediate or material effect on lending rates. APRA proposes that the increased requirements will take full effect from 2023, following the relevant authorized deposit-taking institutions being notified of adjustments to Total Capital requirements from 2019.


Related Links

Comment Due Date: February 08, 2019

Keywords: Asia Pacific, Australia, Banking, Orderly Resolution, Loss Absorbing Capacity, Recovery and Resolution, Total Capital Requirement, APRA

Related Articles

HKMA Decides to Maintain Countercyclical Capital Buffer at 2.5%

HKMA announced that, in accordance with the Banking (Capital) Rules, the countercyclical capital buffer (CCyB) ratio for Hong Kong remains at 2.5%.

April 16, 2019 WebPage Regulatory News

EP Approves Agreement on Package of CRD 5, CRR 2, BRRD 2, and SRMR 2

The European Parliament (EP) approved the final agreement on a package of reforms proposed by EC to strengthen the resilience and resolvability of European banks.

April 16, 2019 WebPage Regulatory News

FDIC Consults on Approach to Resolution Planning for IDIs

FDIC approved an Advance Notice of Proposed Rulemaking (ANPR) and is seeking comment on ways to tailor and improve its rule requiring certain insured depository institutions (IDIs) to submit resolution plans.

April 16, 2019 WebPage Regulatory News

EP Resolution on Proposal for Sovereign Bond Backed Securities

The European Parliament (EP) published adopted text on the proposal for a regulation of the European Parliament and of the Council on sovereign bond-backed securities (SBBS).

April 16, 2019 WebPage Regulatory News

PRA Seeks Input and Issues Specifications for Insurance Stress Tests

PRA announced that it will conduct an insurance stress test for the largest regulated life and general insurers from July to September 2019.

April 15, 2019 WebPage Regulatory News

PRA Finalizes Policy on Approach to Managing Climate Change Risks

PRA published the policy statement PS11/19, which contains final supervisory statement (SS3/19) on enhancing banks’ and insurers’ approaches to managing the financial risks from climate change (Appendix).

April 15, 2019 WebPage Regulatory News

EBA Single Rulebook Q&A: First Update for April 2019

EBA published answers to nine questions under the Single Rulebook question and answer (Q&A) updates for this week.

April 12, 2019 WebPage Regulatory News

EIOPA Statement on Application of Proportionality in SCR Supervision

EIOPA published a supervisory statement on the application of proportionality principle in the supervision of the Solvency Capital Requirement (SCR) calculated in accordance with the standard formula.

April 11, 2019 WebPage Regulatory News

FED Updates Form and Supplemental Instructions for FR Y-9C Reporting

FED updated the form and supplemental instructions for FR Y-9C reporting. FR Y-9C is used to collect data from domestic bank holding companies, savings and loan holding companies, U.S intermediate holding companies, and securities holding companies with total consolidated assets of USD 3 billion or more.

April 11, 2019 WebPage Regulatory News

OSFI Finalizes Guidelines on Liquidity Adequacy and NSFR Disclosures

OSFI published the final Liquidity Adequacy Requirements (LAR) guideline and the net stable funding ratio (NSFR) disclosure requirements guideline.

April 11, 2019 WebPage Regulatory News
RESULTS 1 - 10 OF 2920