The ‘buffer’ framework in bank capital management is up for an overhaul as part of a wider “package of bank capital reforms.”

APRA chair Wayne Byres told a risk management forum yesterday the prudential regulator “hopes to release” its paper for consultation next week.

“A redesign of the buffer framework is an important part of our package,” Byres said.

“Capital buffers are built up in good times to be used when needed, and we will be proposing to make buffers a more prominent part of the capital framework going forward.”

Perhaps more sensitive for the industry will be APRA’s exploration of Additional Tier 1 instruments (AT1).

“Experience over the past year has raised questions as to whether these instruments are capable of providing the loss absorbing capacity they are designed to achieve,” Byres said.

“The role and impact of AT1 instruments is being discussed internationally, and while we will not be proposing any changes in our consultation package next week, we will be watching how this broader debate plays out.”

Byres was speaking at a Forum of the Risk Management Association.