COBA responds to new phase of consultation on revised capital framework


The Customer Owned Banking Association looks forward to consulting with our member banking institutions and engaging with APRA on draft revisions to the banking capital framework released today by APRA.

The capital framework is critically important to competition and consumer outcomes in banking. COBA welcomes APRA’s confirmation that it is seeking to balance competition with financial safety in this multi-phase consultation process.

“Clearly APRA’s objective of having ‘unquestionably strong’ capital requirements is the key driver of these proposals,” said COBA CEO Mike Lawrence.

“APRA is proposing tougher capital requirements than those that currently apply for home loans with higher loan-to-valuation ratios. These proposals are even tougher than the global benchmarks set out in the Basel framework.

“We acknowledge that APRA is also proposing to ease capital requirements on very low risk home loans.

“We note APRA’s commentary about the impact of the difference in risk weights for banking institutions using the standardised model compared to banks using the IRB model. This commentary is a very welcome contribution to debate about levelling the playing field and removing competitive distortions in the regulatory framework.

“A critical further step in this process will be setting the capital floor for IRB banks that APRA intends to finalise in the second half of next year.

“We appreciate APRA’s development of a simplified framework for smaller, less complex banking institutions.

“We also want to acknowledge areas where APRA has responded to concerns raised in the first round of consultations, such as the treatment of secured car loans.

“We agree with APRA that revising the capital framework is a ‘large, complex initiative’ and extensive analysis will be needed to determine the impact of proposed changes.”

A PDF of the media release can be found here.