Reg­u­la­tor or­ders big four to raise cap­i­tal re­serves

Townsville Bulletin - - NEWS -

AUS­TRALIA’S big­gest banks will need to hold bil­lions of dol­lars in ex­tra cap­i­tal against their home loans fol­low­ing a move by the bank­ing reg­u­la­tor to strengthen the coun­try’s fi­nan­cial sys­tem.

The Aus­tralian Pru­den­tial Reg­u­la­tion Au­thor­ity ( APRA) says it will in­crease the av­er­age risk weight­ing for home loans from around 16 per cent to at least 25 per cent from July 1, 2016.

In a state­ment, APRA said the move would re­quire the banks to lift their cap­i­tal re­serves by around 80 ba­sis points on av­er­age.

That would go some way to­ward the ex­tra 200 ba­sis points of cap­i­tal APRA wants to banks to hold in or­der for their re­serves to rank among the top quar­tile of global banks, which was a rec­om­men­da­tion of the gov­ern­ment’s Fi­nan­cial Sys­tem In­quiry.

The move will ap­ply to the big four banks as well as Mac­quarie Group.

ANZ said it would need to add another $ 2.3 bil­lion to its mort­gage lend­ing book to meet the re­quire­ment.

West­pac said that if the APRA move was im­posed to­day, its com­mon eq­uity tier one ra­tio would fall to around 8.5 per cent and it would need to al­lo­cate another $ 3 bil­lion to lift it to­wards the top end of its pre­ferred 8.75 to 9.25 per cent range.

Na­tional Aus­tralia Bank said it was well placed to process the lift in risk weights af­ter rais­ing $ 5.5 bil­lion from in­vestors in May.

The Com­mon­wealth Bank said it had been work­ing on op­tions to lift its cap­i­tal lev­els, while Mac­quarie Group said it would fund any ex­tra re­quire­ments through re­tained earn­ings and its ex­ist­ing cap­i­tal sur­plus.

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