The prudential regulator says some banks may have to raise additional capital as a result of its review of how much equity lenders must hold to support subsidiaries.
The Australian Prudential Regulation Authority on Tuesday said it does not expect to materially increase the amount of capital required across the industry, with proposals effectively increasing the equity required for investments in large subsidiaries and reducing that for smaller units.
“However, individual ADIs (authorised deposit-taking institutions) may need to raise capital, or may gain a capital benefit, depending on the level of their exposures to subsidiaries,” APRA said on Tuesday.
APRA’s proposals were partly shaped by the Reserve Bank of New Zealand proposal to materially lift regulatory capital for the country’s banks – the four largest of which are owned by Commonwealth Bank, Westpac, NAB and ANZ.
“These proposed measures seek to support the resilience of the major banks’ Australian operations,” APRA deputy chair John Lonsdale said.
“In relation to New Zealand, there are a number of options available to the banks. If they decide to fund any higher capital requirements by retaining local profits, they are unlikely to require additional capital domestically.”
APRA aims to finalise its changes after January 31, when a consultation period closes, and to impose the new standard from the start of 2021.
NAB and ANZ both said there were reviewing APRA’s consultation paper.
“An update will be provided after further analysis,” ANZ said.
Shares in Australia’s big four banks were mixed shortly before midday AEDT, with ANZ and NAB edging higher, Commonwealth flat, and Westpac lower by 0.21 per cent.