Featured Product

    APRA Decides to Increase Loss-Absorbing Capacity of D-SIBs

    July 09, 2019

    APRA published a letter responding to the submissions on proposed changes to the application of the capital adequacy framework designed to support the orderly resolution of a failing authorized deposit-taking institution. In November 2018, APRA had proposed that the four domestic systemically important banks (D-SIBs) be required to increase their total capital by four to five percentage points of risk-weighted assets (RWA) over four years. Post consultation, APRA will require the major banks to increase total capital by three percentage points of RWA by January 01, 2024.

    APRA had expected that banks would meet the bulk of the increased capital requirement by raising additional tier 2 capital. APRA received seven submissions to the consultation and met with a range of relevant stakeholders, including authorized deposit-taking institutions, rating agencies, and other market participants, and continued to consult with the Council of Financial Regulators. APRA also had extensive dialog with the authorized deposit-taking institutions, arrangers of tier 2 issuance in global markets, and significant investors in tier 2 instruments. APRA amended its initial proposal in response to the concerns raised in a number of submissions about a lack of sufficient market capacity to absorb an extra 4% to 5% of RWA in tier 2 issuance and the potential to excessively increase bank funding costs. A number of respondents provided useful market capacity analysis in their submissions. Following this consultation process, APRA expects that the issuance of an additional 3% of RWA in tier 2 instruments can be achieved in an orderly manner and be maintained through varied market conditions. 

    However, the overall long-term target of an additional four to five percentage points of loss-absorbing capacity remains unchanged. Over the next four years, APRA will consider the most feasible alternative method of sourcing the remaining one to two percentage points, taking into account the characteristics of the Australian financial system. In addition, as per the proposal, for small to medium authorized deposit-taking institutions, extra loss-absorbing capacity would be considered on a case-by-case basis as part of the resolution planning process. The changes would increase the financial resources available for APRA to safely resolve an authorized deposit-taking institution and minimize the need for taxpayer support, in the unlikely event of failure. They also fulfill a recommendation from the 2014 Financial System Inquiry that APRA implement a framework for minimum loss-absorbing and recapitalization capacity. 

     

    Related Links

    Effective Date: January 01, 2024

    Keywords: Asia Pacific, Australia, Banking, Loss Absorbing Capacity, Recovery and Resolution, Orderly Resolution, Regulatory Capital, Basel III, D-SIBs, Systemic Risk, APRA

    Featured Experts
    Related Articles
    News

    EBA Publishes Standards on Disclosure of Investment Policy Under IFR

    The European Banking Authority (EBA) published the final draft regulatory technical standards on disclosure of investment policy by investment firms, under the Investment Firms Regulation (IFR).

    October 19, 2021 WebPage Regulatory News
    News

    EBA Updates Filing Rules for Supervisory Reporting

    The European Banking Authority (EBA) published version 5.1 of the filing rules for supervisory reporting.

    October 19, 2021 WebPage Regulatory News
    News

    ECB Amends Guideline on Procedures for Collection of AnaCredit Data

    The European Central Bank (ECB) Guideline 2021/1829 on the procedures for the collection of granular credit and credit risk data has been published in the Official Journal of European Union.

    October 19, 2021 WebPage Regulatory News
    News

    APRA Finalizes Guidance for New Prudential Standard on Remuneration

    The Australian Prudential Regulation Authority (APRA) published the prudential practice guide CPG 511 to assist banks, insurers, and superannuation licensees in meeting requirements of CPS 511, the new prudential standard on remuneration.

    October 18, 2021 WebPage Regulatory News
    News

    OCC Updated LIBOR Self-Assessment Tool for Banks

    The Office of the Comptroller of the Currency (OCC) published a bulletin that provides an updated self-assessment tool for banks to evaluate their preparedness for cessation of the London Interbank Offered Rate (LIBOR).

    October 18, 2021 WebPage Regulatory News
    News

    TCFD Updates Guidance for Financial Disclosures on Climate Risk

    The Financial Stability Board (FSB) published a report that examines the progress made toward disclosures aligned with recommendations of the Task Force on Climate-related Financial Disclosures (TCFD).

    October 14, 2021 WebPage Regulatory News
    News

    BCBS Report Examines Progress on Adoption of Basel III Framework

    The Basel Committee on Banking Supervision (BCBS) published the progress report on adoption of the Basel III regulatory framework in member jurisdictions.

    October 14, 2021 WebPage Regulatory News
    News

    ACPR Implements Updates Related to DPM Version 3.1

    The French Prudential Supervisory Authority (ACPR) has implemented, in its information system, updates linked to the Data Point Model (DPM) version 3.1.

    October 14, 2021 WebPage Regulatory News
    News

    EBA Note Examines Transition Risks of Benchmark Rates

    The European Banking Authority (EBA) published a thematic note that aims to identify and raise awareness of the transition risks of benchmark rates, as the London Interbank Offered Rate (LIBOR) and the Euro Overnight Index Average (EONIA) are close to being phased out.

    October 14, 2021 WebPage Regulatory News
    News

    OSFI to Communicate Next Steps on Climate Risk Policy in Early 2022

    In a letter to the federally regulated financial institutions and pension plans, the Office of the Superintendent of Financial Institutions (OSFI) published a summary of the feedback received to the January 2021 discussion paper on ways to address climate risks.

    October 12, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 7568