
APRA’s new capital benchmarks for banks
The Australian Prudential Regulation Authority (APRA) has just announced that it is increasing the capital adequacy ratios for banks and other authorised deposit-taking institutions (ADIs) in Australia, with the new rates to be in place by January 2020. Today we explain what the relevant capital adequacy ratio is, the different methods used to calculate it and describe the two new benchmarks. By Dr. Drew Donnelly, Compliance Quarter Background In Expected credit loss: the new way banks must recognise shifting credit risk we discussed APRA recent changes to the way in which banks must recognise impairment of loans. The goal with that change was to make sure banks “maintain provisions and reserves adequate to absorb existing and estimated future credit losses into its business”. Another important tool employed by APRA to…