The Australian Prudential Regulation Authority (APRA) will require banks to hold higher capital levels under it for interest-only loans with higher risk. New bank capital framework..
Effective January 2023, this change aims to establish “arguably strong” Australian standards in line with internationally agreed Basel III requirements.
The new framework will also relax the rules for high deposit loans, small business loans and commercial real estate lending. As a result, banks are allowed to hold less capital for these types of loans.
The new framework may widen the price gap between different types of loans as banks pay more attention to deposits on new loans.
“Capital is the foundation of the security and stability of the banking system,” said APRA Chair Wayne Bryce. “Protects depositors during stressful times, gives banks access to funding, facilitates payments, and helps banks continue to lend to their customers, good and bad.”
“Australia’s banking sector is already strongly capitalized by international standards, but the new capital framework will help ensure that it stays that way.”
The framework also introduces a simplified capital requirement for small banks with assets of less than $ 20 billion (US $ 14 billion) and a simple business model.
APRA states that the Basel framework, which was developed primarily for large banks operating internationally, means that the cost of implementing a complete framework for small banks can outweigh the benefits. I am.
“Developing a simplified approach for small banks avoids unnecessary regulatory burdens without compromising soundness,” Bryce said. “It is designed to benefit many financial institutions. About three-quarters of domestic banks will have access to a simplified approach.”
Based on current information available, Macquarie Bank, based in Australia, the world’s largest infrastructure asset manager, said the new framework will be a quarter of its capital surplus, about $ 2.2 billion (US $ 1.57 billion). Said to affect.
The Macquarie Group said the capital surplus included provisions for these changes for some time as APRA continued to consult with the industry.
“We welcome the final decision on these important capital reforms, which will clarify the investment community,” said Alex Harvey, CFO of Macquarie Group, in a statement.
This framework was developed over a four-year period in consultation with the industry to ensure that Australian banks remain financially strong to withstand future adverse economic conditions.