The Australian Prudential Regulation Authority’s new bank capital framework has shaved A$2.4 billion off Macquarie Group’s capital surplus above the regulatory minimum.
In a December quarter update released yesterday, Macquarie provided details of the impact of the new capital framework, which took effect on January 1, stressing that despite the reduction in its capital surplus its common equity tier 1 capital ratio is still well above the minimum.
APRA’s new bank capital framework (APS 110) has been designed to embed “unquestionably strong” levels of capital. Higher capital buffers are the key change to the framework, which APRA says will provide more flexibility during periods of stress.
Over half of banks’ CET1 capital will be in the form of capital conservation buffers, countercyclical capital buffers and, for some, domestically systemically important bank (D-SIB) buffers.
ADIs will be expected to maintain an “adequate management target” above regulatory capital buffers to allow for business growth, volatility and dividend policy.
The major banks now have a minimum capital requirement of 10.25 per cent. APRA has said it expects the major banks to operate with CET1 ratios above 11 per cent, once their own targets are taken into account.
At December 31, Macquarie’s APRA Basel III capital supply was $37.4 billion, made up of $31.4 billion of ordinary equity and $5.8 billion of hybrids. The group capital surplus was $12.5 billion.
With the changes to the regulatory capital rules, that surplus has come down to $10.1 billion.
Macquarie’s bank group Level 2 CET1 capital was 13.3 per cent.