APRA issues annual update on countercyclical capital buffer setting
The Australian Prudential Regulation Authority has confirmed that the countercyclical capital buffer (CCyB) will be set at a new default rate of 1 per cent of risk-weighted assets (RWA) from 1 January 2023.
The decision is consistent with guidance first announced when APRA finalised the new regulatory capital framework for Australian banks in late 2021.
The CCyB is an additional amount of capital that APRA can require banks to hold or release at certain points in the economic and financial cycle with the aim of supporting the sector to absorb losses and supply credit. It is one macroprudential policy tool that APRA can use to mitigate risks to financial stability at a system-wide level, and has been set at zero per cent of RWA since it was introduced in 2016.
APRA will provide a broader update early next year on macroprudential policy settings in the context of the current risk environment, which reflects its commitment to greater transparency under its new macroprudential policy framework.
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The Australian Prudential Regulation Authority (APRA) is the prudential regulator of the financial services industry. It oversees banks, mutuals, general insurance and reinsurance companies, life insurance, private health insurers, friendly societies, and most members of the superannuation industry. APRA currently supervises institutions holding around $9 trillion in assets for Australian depositors, policyholders and superannuation fund members.