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Macquarie forecasts $2.2bn impact of APRA reforms

4 minute read

APRA’s new bank capital framework is expected to impact Macquarie’s surplus capital.

Macquarie Group has estimated that capital reforms released by the Australian Prudential Regulation Authority (APRA) this week, will have a $2.2 billion impact on its surplus capital.

The company said that the predicted $2.2 billion pro forma impact on its capital surplus above regulatory requirements was largely due to increases to regulatory capital buffers announced by the regulator.

These include a 1.25 per cent increase in the capital conservation buffer for authorised deposit-taking institutions using the internal ratings-based (IRB) approach, and settings which place the baseline counter cyclical capital buffer at 1 per cent.


Moreover, other key features of APRA’s reforms include changes to risk-weighted assets (RWA) and a requirement that would see IRB authorised deposit-taking institutions calculate and disclose RWAs under the standardised approach and the introduction of a capital floor at 72.5 per cent of standardised RWAs.

In a statement to the ASX, Macquarie confirmed that as of September 30, its capital surplus above regulatory requirements was $8.4 billion. The group said that it has included a provision for these regulatory changes “for some time”.

“We welcome the finalisation of these important capital reforms which will provide clarity to the investment community,” said Macquarie CFO Alex Harvey in the ASX filing. 

In a separate statement on Monday, APRA said its new bank capital framework was designed to embed “unquestionably strong” levels of capital and align Australian standards with the internationally agreed Basel III requirements.

The regulator confirmed it would, however, continue to engage with the industry before the reforms are introduced in 2023. 

“Although Australia’s banking sector is already strongly capitalised by international standards, the new capital framework will help ensure it stays that way,” said APRA chair Wayne Byres.

According to APRA, banks will not be required to raise additional capital under its new framework since they already meet the “unquestionably strong” benchmarks set in 2017. Instead, the new framework would strengthen financial resilience, it said. 

Westpac has welcomed APRA’s announcement and said it expected to remain well capitalised under the new framework.

“We are working through the impact of these changes and expect to provide more details with our 1H22 results in May 2022,” the bank said in a statement. 

The Commonwealth Bank is expected to provide an update on the final impact and its long-term capital management approach in its full year results in 2022.

Jon Bragg

Jon Bragg

Jon Bragg is a journalist for Momentum Media's Investor Daily, nestegg and ifa. He enjoys writing about a wide variety of financial topics and issues and exploring the many implications they have on all aspects of life.