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Australia Sets Higher Capital Buffer for Four Biggest Banks 

December 24, 2013
Narayanan Somasundaram, Bloomberg

Australia’s four largest banks will need to carry an extra 1 percent of core tier 1 capital from Jan. 1, 2016, due to their systemically important status, according to the country’s banking regulator.

Australia & New Zealand Banking Group Ltd. (ANZ), Commonwealth Bank of Australia (CBA), National Australia Bank Ltd. and Westpac Banking Corp. (WBC) need to have a greater capacity to absorb losses, the Australian Prudential Regulation Authority said in a statement today.

The nomination of domestic systemically important banks, or D-SIBs, is part of Basel III rules to deal with any threat to domestic and regional financial stability. APRA expects the lenders will have sufficient capital to meet the new rules by 2016 and said the 1 percent higher loss absorbency rate is at the lower end of rates applied elsewhere in the world.

“While we don’t expect equity raisings, we expect banks will again need to rely on dividend reinvestment plans to meet higher capital requirements,” Victor German, a Sydney-based analyst at Nomura Holdings Inc., said in an e-mail, referring to discounted stock offered by banks to encourage investors to accept shares in place of dividends.

Read more: Bloomberg

 
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