APRA releases annual Information Paper on the countercyclical capital buffer

The Australian Prudential Regulation Authority (APRA) today released its annual Information Paper on the countercyclical capital buffer. APRA is maintaining the countercyclical capital buffer at zero per cent.

The Information Paper contains an update on the setting of the countercyclical capital buffer and on the levels of a set of core indicators of systemic risks associated with the financial cycle, including credit growth and asset prices, which are used to guide decision-making, as set out in APRA’s framework for the countercyclical capital buffer.

The countercyclical capital buffer is designed to be used to raise banking sector capital requirements in periods where excess credit growth is judged to be associated with the build-up of systemic risk.

Since the buffer became part of the Australian capital adequacy framework in the beginning of 2016, APRA has continued to monitor indicators of systemic risk within the Australian financial system. In that time, APRA has not observed a change in the level of systemic risk that would necessitate a change in the level of the countercyclical capital buffer.

APRA will continue to closely monitor developments, including but not limited to movements in the core risk indicators, and will adjust the buffer level if conditions warrant it in future.

An announcement to increase the buffer may have up to 12 months’ notice before the new buffer comes into effect; a decision to reduce the buffer will generally be effective immediately.

The annual countercyclical capital buffer Information Paper can be viewed on APRA’s website.