Latest Products

Changes in Capital Requirements

Friday 3 December 2021

 


This week the chair of the prudential regulator reminded banking industry that capital  is critical for the stability of the banking system.

Australian Prudential Regulation Authority (APRA) Chair Wayne Byres said in an official statement that “It protects depositors during periods of stress, ensures banks can access funding, facilitates payments and helps banks to keep lending to their customers during good times and bad.”

Byres said that while Australian banks more than meet the international standards when it comes to capital requirements, he emphasised that the new capital framework will keep Australian banks to high standard.

The prudential regulator published revisions to the capital requirements at the end of November.

Failure in GRC leads to higher Capital Requirement
This statement comes the same week that APRA announced that  it would require Heritage Bank to increase their minimal capital requirement to $5 million.

In relation to the Heritage Bank matter Deputy Chairman John Lonsdale said in an official statement, “This capital overlay reflects our assessment of the bank’s heightened operational risk and compliance profile. The increased capital requirement will remain in place until we are satisfied that our concerns have been addressed and weaknesses rectified.”

The regulator said that that poor operational risk and compliance frameworks led to incorrect reporting of capital.

This capital raising requirement will be in addition to a remediation program to address their governance, risk, and compliance frameworks
 
Revisions to Capital Framework
APRA Chair Byres said,  “The development of a simplified approach for smaller banks avoids unnecessary regulatory burden, without jeopardising prudential safety. It has been designed to benefit a large number of institutions – about three-quarters of domestic banks will be able to take advantage of the simplified approach.”