The four major lenders of Australia may struggle to achieve the new capital requirements mandated by the Australian Prudential Regulation Authority (APRA), a senior Westpac official told the Australian Financial Review.
Westpac treasurer Curt Zuber told the publication in an interview that the new requirements are ‘sound in principle but tough to achieve’.
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In November last year, APRA proposed to increase capital buffer requirements for all the Australian banks.
Australian Financial Review quoted Zuber as saying: “As we go through cycles, it is potentially problematic for the banks to get the volumes they need in an economic way for the system which allows for the balance we want to achieve.”
If implemented, the banks will be required to maintain higher capital to bolster loss-absorbing capabilities. The new proposals are aligned with the latest international standards developed by the Basel Committee on Banking Supervision.
Accordingly, the four major Australian lenders, National Australia Bank (NAB), Commonwealth Bank, ANZ and Westpac, will have to raise between A$67bn and A$83bn by 2023.
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By GlobalDataThe comments come at a time when the Australian banking sector was subject to public inquiry following series of scandals and mismanagement.
The new capital requirements will increase the available capital by 4 to 5 percentage points by 2023. Currently, the lenders maintain a 14.5% of total risk-weighted assets, reported Reuters.
Currently, APRA is seeking feedback from all concerned stakeholders.
Under the proposals, the banks are advised to raise funds through Tier 2 subordinated debt capital, through they are allowed to avail other avenues to meet the requirements.
