Australia's banking regulator has opened consultation on changes to credit risk capital settings that could meaningfully expand banks' capacity to lend across several commercially significant categories.
The Australian Prudential Regulation Authority (APRA) is proposing to lower standardised risk weights in three areas: large domestic public infrastructure exposures, high-quality unrated corporate lending, and residential land acquisition, development, and construction (ADC) lending.
The proposals form the first of three workstreams in a broader capital and liquidity reform package first announced in March 2026. APRA intends to finalise credit risk capital changes in the second half of 2026, with a proposed effective date of 1 April 2027. Consultation on liquidity risk and market risk will follow over the next 12 months.
APRA Chair John Lonsdale (pictured) framed the proposals as a calibration exercise rather than a loosening of standards, describing the regulator's objective as getting "the balance right" between safety and efficiency. The current settings, Lonsdale argued, do not always reflect the underlying risk of specific loan categories — and adjusting them creates headroom without compromising the broader prudential settings.
"By making our risk weights for some categories of corporate lending more granular and risk-sensitive, we believe we can improve the efficiency of the capital framework without compromising core prudential objectives," he said in a media release. "By reducing the amount of capital banks need to hold against these categories of loans, it should give banks greater capacity to deploy released capital in a manner that supports broader economic outcomes."
APRA confirmed the full package is expected to be cost neutral. The regulator also noted that despite relatively high capital requirements, bank returns are broadly in line with international peers, capital does not currently appear to constrain lending, and credit remains readily available — suggesting the proposed changes are designed to improve efficiency rather than address a credit crunch.
For brokers, the practical question is which of the three proposals moves the needle on client deals.
The most immediately relevant for mortgage and finance brokers is the ADC adjustment. APRA is proposing to lower the qualifying pre-sales requirement for residential developments from 100% of total debt to 50% — bringing more residential property development loans within the lower 100% risk weight threshold. For build-to-let structures, APRA proposes to replace the pre-sales requirement with a new pre-lease requirement. Both changes are expected to reduce the cost of capital for residential development and increase bank capacity to support housing supply.
The unrated corporate lending change carries its own commercial implication. APRA is proposing to introduce a new 65% risk weight for high-quality unrated borrowers graded equivalent to an A- credit rating or better — down from the current 85% investment grade weight. APRA expects this could lower the cost of credit for stronger unrated borrowers, with direct flow-on effects for brokers structuring business loans for expansion, innovation, or efficiency investment.
The infrastructure lending change — applying domestic public sector entity risk weights to eligible large public infrastructure operators — is the least directly relevant for most broker clients but may improve credit conditions for project finance work in the commercial broking space.
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