Wednesday 19 July 2017 by FIIG Research General

APRA announces ‘unquestionably strong’ capital benchmarks

The Australian Prudential Regulation Authority (APRA) has announced its definition of “unquestionably strong” capital requirements for Australia’s major banks


APRA has announced its definition of unquestionably strong capital requirements for Australia’s four major banks. It stated that the big four banks need to have Common Equity Tier 1 (CET1) capital ratios of at least 10.5% to meet the unquestionably strong benchmark. Notably, APRA focused on CET1 capital requirements, stating it is the “highest quality capital” and most likely to create confidence in a bank’s financial strength.

For the major banks, the 10.5% capital ratio requirement will amount to an increase of around 1%, based on their capital levels as at December 2016.

For other Australian authorised deposit taking institutions (ADIs), the new standard will require an increase in minimum capital requirements of around 0.50%. APRA expects Australian banks will be able to meet the new requirements from their existing capital base, without having to raise additional capital from external markets.

All ADIs are expected to meet the new benchmarks by 1 January 2020.

APRA’s full statement is available here.External link - opens in a new window