Powered by MOMENTUM MEDIA
subscribe to our newsletter
APRA seeks to reduce 'contagion risk'

APRA seeks to reduce 'contagion risk'

Australian banks will be required to limit their exposures to unrelated counterparties to 25 per cent of Tier 1 Capital as APRA seeks to reduce "contagion risk".

APRA has released a consultation paper on revisions to the large exposures of authorised deposit-taking institutions (ADIs) that seeks to bring Australia in line with the Basel Committee recommendations.

Under the proposed changes, Australian ADIs will only be permitted to devote 25 per cent of their Tier 1 capital to an unrelated ADI (down from 50 per cent).

Advertisement
Advertisement

"APRA’s large exposure framework aims to limit the impact of losses when a counterparty defaults, and restrict contagion risk from spreading across the financial system," said the regulator.

APRA has also proposed a new limit of 15 per cent of Tier 1 capital to be applied to exposures to banks designated as either a global systemically important bank or a domestic systemically important bank.

The prudential regulator has also released a set of new criteria that will be used to identity a group of connected counterparties and measure large exposure values.

The revised large exposure requirements are intended to come into effect from 1 January 2019, said APRA.

The deadline for written submissions on the proposals is 5 July 2017.

[Related: APRA sets firm eye on bank capital standards]

APRA seeks to reduce 'contagion risk'
mortgagebusiness

 

Latest News

Westpac and the Commonwealth Bank’s share of the third-party mortgage market has spiked, in contrast to sharp declines from NAB and ANZ, t...

A non-major lender has dropped its fixed mortgage rates, becoming the fourth lender to reprice its offerings over the past two weeks.   ...

The interest lenders earn on mortgages is expected to remain under pressure this year and next, according to Moody’s. ...

FROM THE WEB
podcast

LATEST PODCAST: What drops in fixed rates may mean for the mortgage market

Do you think the banking royal commission recommendations could negatively impact competition in the mortgage market?