The Customer Owned Banking Association (COBA) looks forward to engaging with APRA again soon on reforms to the banking capital framework.
APRA has disclosed today that it is putting the finishing touches to the next consultation package on capital for release in the next few weeks.
“The capital framework is critically important to competition and consumer outcomes in banking,” said COBA CEO Michael Lawrence.
“The capital treatment of different kinds of home loans is a key focus of APRA’s reform agenda and home lending is our sector’s core business.
“The difference in risk weights and therefore capital settings between the major banks and smaller banks has long been a source of competitive distortion. Major banks using the internal ratings-based approach have had advantages over their smaller competitors using the standardised approach to capital.
“We welcome APRA’s objective of making the capital settings more comparable by making sure all banks disclose a capital ratio under the common, standardised approach.
“This will improve comparability between the two capital approaches used by banks and provide transparency on the measures that APRA has taken over the last few years to narrow this gap.
“A critical further step in this process will be setting the ‘capital floor’ that links the major banks’ capital requirements to the standardised approach.”
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