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Capital Reform Update for Standardised ADIs



APRA on the 21st July 2021 provided an update to industry based on the proposed bank capital reforms off the back of the consultation paper released in December 2020 and subsequent responses received from industry and other stakeholders made to APRA in April 2021.


APRA have invited ADIs and interested stakeholders to provide further feedback on these policy settings by 20th August 2021 along with conducting a further quantitative impact study (QIS) on a best-effort basis, with responses also due on the 20th August 2021. APRA have emphasised that the full suite of policy settings is not yet final, and there may be further revisions to these and other issues with the aim of releasing the final prudential standards in November 2021.


Here's a brief summary of key changes announced by APRA in the latest update.


Unquestionable Strong Benchmarks and Enhanced Competition


APRA have reinforced their views of improving the flexibility of the framework and maintain unquestionably strong capital benchmarks. Along with enhancing competition through requiring higher capital buffer requirements for larger banks and ensuring a floor on Internal Ratings Based (IRB) risk weights that limit benefits compared to smaller banks on the standardised approach.


Capital Buffers are likely to remain unchanged


APRA intends to maintain the buffers as outlined below and as explained in the consultation paper in December 2020.


The base level for the countercyclical capital buffer (CCyB) of 1.0 per cent of RWA for all ADIs remains.


The capital conservation buffer (CCB) of 4.0 per cent in total of RWA for IRB ADIs. The CCB for ADIs on the standardised approach remains at 2.5%. The Domestic Significant Banks (D-SIB) that applies to ANZ, CBA, NAB and WBC remains.




Residential Mortgages : What has changed?


Interest Only