From Banking Day:
The Australian Prudential Regulatory Authority has finally confirmed that it will impose additional capital requirements on Australia’s biggest banks.
Speaking at an Australian Financial Review conference in Sydney yesterday, APRA’s chairman, John Laker, was reported as saying APRA would apply tougher capital requirements to domestic systemically important banks, or D-SIBs. An APRA spokesman later confirmed the comments.
The IMF’s latest Financial System Stability Assessment of Australia, released earlier this month, showed it would be difficult for the Big Four to avoid be classified as D-SIBs. The Four have a higher share of total domestic banking assets than the top four banks in any other developed nation.
It was a big day for John Laker yesterday. First confirming Australian banks have a structural problem with housing and then endorsing this conceptually sensible outcome. Any attempt to define Australia’s big four banks as anything other than systemically important wouldn’t pass the laugh test. Of course the 1% charge itself is laughable given the internal risk models used by the banks reduce capital held against mortgage books to tiny levels. But progress is progress.
