Mortgage brokers could see shifts in funding costs and business lending appetite as APRA moves to overhaul how banks manage capital and liquidity, aiming to keep the system “unquestionably strong” while freeing capacity for productive lending.
The prudential regulator will consult on a multi‑year package that tightens liquidity rules for large banks, offers more risk‑sensitive settings for smaller authorised deposit‑taking institutions (ADIs), and recalibrates capital requirements for selected types of credit risk.
APRA Chair John Lonsdale (pictured left) said the review reflects several years of geopolitical and market volatility and lessons from the 2023 banking turmoil.
“While our bank capital framework is unquestionably strong, our liquidity framework has not kept up with international practice and needs to be uplifted,” Lonsdale said in a media release.
For larger banks on the Liquidity Coverage Ratio framework, APRA is considering new measures – potentially via a Pillar 2 liquidity overlay – to capture risks not fully addressed by minimum requirements, such as intraday payment exposures and deposits that can run quickly just outside the 30‑day horizon.
At the same time, APRA plans a more risk‑sensitive liquidity regime for smaller ADIs that rely on stable funding, which could allow some to hold fewer liquid assets and reduce costs.
The Australian Banking Association said lenders would work closely with the regulator. ABA chief executive Simon Birmingham (pictured right) noted banks were “encouraged by APRA’s commitment on capital to recalibrate risk weightings to give banks more flexibility to provide lending and support investment across the economy.”
On the capital side, APRA will consult on more granular risk weights for specific credit exposures. Areas flagged include high‑quality lending to critical infrastructure projects, strong but unrated corporates, and residential property developers.
“Changes that can assist in the construction of new housing and infrastructure to help tackle Australia’s supply challenges are welcome,” Birmingham said in a media release.
A simplified version of the Basel Fundamental Review of the Trading Book is also planned, with APRA aiming to preserve risk coverage while materially reducing implementation and ongoing compliance costs.
APRA expects the overall package to be broadly cost neutral across the industry, with large banks balancing tighter liquidity demands against targeted capital relief, and some smaller ADIs seeing net savings.
For more information, read the APRA media release and APRA’s roadmap for capital and liquidity reforms for ADIs.
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