The banking regulator has warned Australia’s major banks may have to further increase their capital buffers, despite the extra $18 billion raised in new equity last year.
In a study published by APRA
yesterday, the regulator warned that banks should not be complacent with their capital buffers – which protects them against financial shocks – despite the study showing that the common equity tier 1 (CET1) capital ratio of Australia's major banks were now in the top quartile of banks internationally.
By comparison, in a similar study last year, the banks were shown to be outside the top 25%, forcing APRA
to follow up with a wave of capital raisings, which saw the banks boost their buffers by $18 billion in total, according to the Sydney Morning Herald
has forewarned that the wave of capital raisings may not be over.
“…[T]he major banks have undertaken significant capital raisings since the 2015 study, which has significantly improved their capital adequacy positon relative to international peers,” APRA
said in its Insight
“That said, the trend of international peer banks strengthening their capital ratios continues. Forthcoming international policy developments will also likely mean that Australian banks need to continue to improve their capital ratios in order to at least maintain, if not improve, their relative positioning.”
The final design and calibration of these reforms will not be decided until around the end of 2016, according to the regulator. Therefore, it would be “prudent” for the banks to continue to plan for the likelihood of strengthened capital requirements in some areas.