APRA Flags Solid Banking System Fundamentals, But Cognisant Of Risks

APRA Chair John Lonsdale is delivering his speech to AFR Banking Summit. Below are some key snippets:

• "The cornerstone of the banking system’s stability. APRA’s new bank capital framework, which took effect from the first of January this year, has not only been informed by the Basel reforms. It also incorporates one of the key findings from 2014’s Financial System Inquiry that Australia’s banks be “unquestionably strong”. For the IRB banks covered by Basel, that’s meant holding additional capital equivalent to 150 basis points. This puts these banks in the top quartile of the international pack for capital strength, helping them retain access to offshore capital markets, which further improves their resilience."
• "To date, the impact of recent events in the US and Europe has been limited here. But that does not mean there are no lessons for us."
• "As the speed of crises has accelerated, regulators have less time to respond than they once did. We can no longer expect to have days or weeks to debate and plan considered responses. We need to be ready to act quickly, but we also need greater confidence than ever in the prudential safeguards we have in place. It may be that we need to look more closely at concentration risk in deposits and adjust requirements where an ADI has particularly high exposure to a particular industry or demographic. These types of contemplations are already underway among international regulators."
• "The APRA's stress testing activity revealed that "the banks in aggregate remained above minimum capital requirements. The funding and liquidity positions of the industry also stood up and that means deposits remained safe in the system."