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 Insights
News

US Agencies Propose Derivative Counterparty Credit Exposure Framework

US Agencies (OCC, FED, and FDIC) proposed to implement a new approach for calculating the exposure amount of derivative contracts under the regulatory capital rule.

December 17, 2018 WebPage Regulatory News
News

HKMA Announces Intention to Consult on Updated BCBS Disclosure Rules

HKMA announced that it will consult the industry in due course on the relevant implementation proposal to give effect to the disclosure requirements of the December 2018 package by BCBS.

December 17, 2018 WebPage Regulatory News
News

HKMA Issues and Revises Reporting Forms Under the IRRBB Framework

HKMA issued a revised version of the Supervisory Policy Manual (SPM) IR-1, with an updated title “Interest Rate Risk in the Banking Book” (IRRBB).

December 14, 2018 WebPage Regulatory News
News

EBA Single Rulebook Q&A: Second Update for December 2018

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

December 14, 2018 WebPage Regulatory News
News

OSFI Proposes Changes to Guideline on Large Exposure Limits

OSFI proposed revisions to the Guideline B-2 on Large Exposure Limits, for implementation in the first quarter of 2020.

December 13, 2018 WebPage Regulatory News
News

BCBS Consults on Disclosure Rules for Leverage Ratio Window-Dressing

BCBS published a consultative document on revisions to the leverage ratio disclosure requirements to address the leverage ratio window-dressing behavior.

December 13, 2018 WebPage Regulatory News
News

PRA Updates the Policy on Approach to Systemic Risk Buffer

PRA published the final Statement of Policy on the PRA approach to the implementation of the systemic risk buffer (SRB), as proposed in the consultation paper CP29/18.

December 13, 2018 WebPage Regulatory News
News

EP Report Examines Financial Supervision and Regulation in US

European Parliament published a report that provides a concise overview of the Dodd-Frank Act, the challenges of its implementation, and efforts to roll back the Act, in large part due to what are viewed to be vague and impractical provisions.

December 12, 2018 WebPage Regulatory News
News

FED Proposes to Revise Several Reporting Forms Including FR Y-9C

FED proposed to extend for three years, with revision, the FR Y-9, FR Y-7N, FR Y-11, and FR 2314 family of reports, in addition to the forms FR 2886b, FR Y-8, FR 2248, FR 2320, FR 2644, and FR 2886b.

December 12, 2018 WebPage Regulatory News
News

EBA Finalizes Guidelines on the STS Criteria in Securitization

EBA published the final guidelines that provide a harmonized interpretation of the criteria for a securitization to be eligible as simple, transparent, and standardized (STS) on a cross-sectoral basis throughout EU.

December 12, 2018 WebPage Regulatory News
RESULTS 1 - 10 OF 2340