APRA to tighten bank capital rules today

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By Leith van Onselen

Back in April, Australian Prudential Regulatory Authority (APRA) chairman, Wayne Byres, delivered a keynote address whereby he warned the banks that they would be required to hold more capital against their mortgage books, noting that “it does not make sense to wait any longer to deal with the question of ‘unquestionably strong’”. Byres also noted that Australia’s banking system has a “notable concentration in housing”, and that “the capital adequacy framework needs to address the concentration in housing lending that has built up in the banking system over time”.

Today, The AFR reveals that the Australian Prudential Regulation Authority (APRA) is poised to unveil its revised capital rules for the banking sector later today. There has been speculation that APRA will require banks to increase their equity capital. Meanwhile, Morgan Stanley forecasts that the Commonwealth Bank of Australia will report a common equity tier 1 capital ratio of about 9.9% for FY2017. Richard Wiles of Morgan Stanley believes APRA’s new capital requirements constitute the biggest source of risk for CBA in the near-term:

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About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.