The Australian Prudential Regulatory Authority (APRA) has today released a discussion paper, which finally acknowledges that the systemic concentration of Authorised Deposit-Taking (ADI) portfolios in residential mortgages poses a problem.
Accordingly, APRA is seeking to increase the risk-weightings applied for some higher risk mortgages, while also continuing to close the gap between the advanced Internal Ratings-Based (IRB) approach used by the Big Four banks and Macquarie and the Standardised Approach used by smaller players (see yesterday’s post for a discussion on this matter). It also proposes to lower the capital requirements attached to productive business lending – a welcome reform.
