Apra denies 8% Tier 1 capital claims

Australian regulator Apra has rejected claims it set an 8% Tier 1 capital ratio requirement

SYDNEY - The Australian Prudential Regulation Authority (Apra) has refuted media reports that it has set a minimum ratio of 8% for Tier 1 capital ratios for banks and other deposit-taking institutions (ADIs). The Australian regulator issued the statement on its website.

Australia implemented Basel II on January 1 2008. Apra says under that framework, ADIs are subject to an 8% prudential capital ratio (PCR) of total risk-weighted assets. Half of that may comprise other forms of capital - such as Tier 2, Tier 3 or 'hybrid' capital, and requiring 4% minimum as 'core' Tier 1.

The Apra statement says: "Apra can, and does, set PCRs for individual institutions at levels above 8%, to ensure that minimum capital requirements for an ADI are consistent with its overall risk profile. PCRs for individual institutions are not published."

Apra maintains Australian banks and ADIs are fulfilling their capital adequacy requirements and the sector is sound and well-capitalised.