Borrow
Up the equity: Banks might need more money
With New Zealand recently lifting the capital requirements of its banks, APRA could soon follow suit – undertaking a review into how much equity Australian banks should be holding.
Up the equity: Banks might need more money
With New Zealand recently lifting the capital requirements of its banks, APRA could soon follow suit – undertaking a review into how much equity Australian banks should be holding.
The prudential regulator said a proposal to alter capital requirements will have the effect of increasing the amount of equity required to support investment in large subsidiaries while reducing capital requirements for smaller subsidiaries.
It estimates that no material additional capital will be required at an aggregate industry level, but individual authorised deposit-taking institutions may need to raise capital or may gain a capital benefit depending on the level of their exposure to subsidiaries.
“These proposed measures seek to support the resilience of the major banks’ Australian operations,” according to APRA deputy chair John Lonsdale.
He said that as the environment currently stands, there are a number of options available to the banks operating in both Australia and New Zealand.
“If they decide to fund any higher capital requirements [in New Zealand] by retaining local profits, they are unlikely to require additional capital domestically.”
How are the big four affected?
With its strong kiwi links, ANZ is the most at risk, although it said its “management actions" may offset much of the $2.5 billion common equity tier 1 (CET1) shortfall.
It is already in the practice of migrating NZ loans to an Australian branch, increasing exposure to Asian subsidiaries.
NAB said its initial assessment was that the proposed changes would not, on a pro forma basis, affect the amount of capital it has to hold.
Westpac also considered there to be no impact from this proposal on the calculation of the group’s reported regulatory capital ratios on a level 2 basis, which are the key ratios reported.
Nevertheless, Westpac must continue to meet prudential requirements for level 1, which may ultimately be impacted.
The Commonwealth Bank of Australia stated that as at 30 June 2019, its level 1 CET1 ratio was 11.2 per cent, which was 50 bps higher than the level 2 CET1 ratio 10.7 per cent.
What is APRA trying to achieve?
The proposed increases to holding of capital reportedly aims to balance the benefit of revenue diversification that banks can achieve by owning subsidiary operations against the potential concentration risk that occurs as those investment increase in size.
In particular, the prudential regulator is proposing that equity investments in subsidiaries (including additional tier 1 and tier 2 capital investment in subsidiaries) will be risk weighted at 250 per cent, up to a limit of 10 per cent of level 1 CET1 capital.
RELATED ARTICLES
-
Australia’s credit pivot: Mortgage enquiries hit a three‑year peak as households lean on plastic — what lenders and fintechs must do next
-
Trust is the new yield: Why brokers win when credibility compounds
-
Mortgage Relief Window: How Australia’s Lenders Are Rewiring Risk and Growth at a Three‑Year Lull
About the author
About the author
Loans
Australia’s credit pivot: Mortgage enquiries hit a three‑year peak as households lean on plastic — what lenders and fintechs must do next
Australian home loan interest has rebounded even as households lean harder on cards and personal loans — a classic late‑cycle signal that demands sharper risk, pricing and AI executionRead more
Loans
Trust is the new yield: Why brokers win when credibility compounds
In a market where products look interchangeable, credibility has become the most defensible asset in mortgage broking. With broker channel share hitting record highs and AI reshaping client ...Read more
Loans
Mortgage Relief Window: How Australia’s Lenders Are Rewiring Risk and Growth at a Three‑Year Lull
Australia’s mortgage stress has eased to its lowest level since early 2023, creating a rare—likely brief—window for lenders, brokers and fintechs to reset risk and rebuild growth. This case study ...Read more
Loans
Why ANZ’s tougher stance on company-borrowed home loans matters: A case study in risk recalibration, competition, and what CFOs should do next
ANZ has tightened mortgage credit parameters for loans where a company or trust is the borrower—an apparently narrow policy tweak with wide operational consequences. It signals a broader recalibration ...Read more
Loans
Mortgage 2026: Australia’s share‑of‑wallet war will be won on switching, data rights and AI discipline
The defining feature of Australia’s 2026 mortgage market won’t be house prices; it will be switching velocity. With competition reforms sharpening the Consumer Data Right, lenders and brokers that ...Read more
Loans
Mortgage remorse reshapes the game: Australia's lending squeeze set to redefine banking and household demand
A growing cohort of Australians is rethinking recent home loan decisions as higher repayments collide with household budgets. This isn’t just consumer angst; it’s an economy-wide red flag for lenders, ...Read more
Loans
Aussie mortgage game-changer: Brokers dominate while AI sharpens the edge
Mortgage brokers now originate roughly three in four new Australian home loans, a structural shift that rewires bank economics, product strategy and customer acquisition. MFAA data shows broker market ...Read more
Loans
Fixing the future: How brokers and lenders can turn rate-hike anxiety into strategic advantage
Australian borrowers are leaning into short-term fixed loans as rate uncertainty lingers, shifting risk from households to lenders and their funding partners. That creates a narrow window for broker ...Read more
Loans
Australia’s credit pivot: Mortgage enquiries hit a three‑year peak as households lean on plastic — what lenders and fintechs must do next
Australian home loan interest has rebounded even as households lean harder on cards and personal loans — a classic late‑cycle signal that demands sharper risk, pricing and AI executionRead more
Loans
Trust is the new yield: Why brokers win when credibility compounds
In a market where products look interchangeable, credibility has become the most defensible asset in mortgage broking. With broker channel share hitting record highs and AI reshaping client ...Read more
Loans
Mortgage Relief Window: How Australia’s Lenders Are Rewiring Risk and Growth at a Three‑Year Lull
Australia’s mortgage stress has eased to its lowest level since early 2023, creating a rare—likely brief—window for lenders, brokers and fintechs to reset risk and rebuild growth. This case study ...Read more
Loans
Why ANZ’s tougher stance on company-borrowed home loans matters: A case study in risk recalibration, competition, and what CFOs should do next
ANZ has tightened mortgage credit parameters for loans where a company or trust is the borrower—an apparently narrow policy tweak with wide operational consequences. It signals a broader recalibration ...Read more
Loans
Mortgage 2026: Australia’s share‑of‑wallet war will be won on switching, data rights and AI discipline
The defining feature of Australia’s 2026 mortgage market won’t be house prices; it will be switching velocity. With competition reforms sharpening the Consumer Data Right, lenders and brokers that ...Read more
Loans
Mortgage remorse reshapes the game: Australia's lending squeeze set to redefine banking and household demand
A growing cohort of Australians is rethinking recent home loan decisions as higher repayments collide with household budgets. This isn’t just consumer angst; it’s an economy-wide red flag for lenders, ...Read more
Loans
Aussie mortgage game-changer: Brokers dominate while AI sharpens the edge
Mortgage brokers now originate roughly three in four new Australian home loans, a structural shift that rewires bank economics, product strategy and customer acquisition. MFAA data shows broker market ...Read more
Loans
Fixing the future: How brokers and lenders can turn rate-hike anxiety into strategic advantage
Australian borrowers are leaning into short-term fixed loans as rate uncertainty lingers, shifting risk from households to lenders and their funding partners. That creates a narrow window for broker ...Read more
