Australia's big banks may need to raise $12.6b to plug steep capital requirements

ANZ may see its CET1 ratio cut by about 75 bps.

Reuters reports that Australia's four largest banks may need to raise $12.6b (NZ$20b) over the next five years as the banking regulator plans to ask lenders to meet higher capital requirements domestically to offset their exposure to large overseas units. 

Also read: Australia mulls higher capital requirements in new blow to earnings

The Australian Prudential Regulation Authority (APRA) said in a consultation paper that it wanted to limit the amount of cash banks can have exposed to a single business unit to 10%. Under current rules, banks may not have enough money to protect Australian customers if they held more cash in overseas business units, it added.

ANZ which owns New Zealand’s largest lender and therefore would be hardest hit by the proposed changes as APRA’s proposed approach could reduce its level 1 CET1 capital ratio by about 75 basis points.

Westpac Banking Corp said that the impact for them could be a reduction of about 40 basis point on its level 1 CET1 capital ratio whilst the Commonwealth Bank of Australia said it estimated a reduction in the same ratio of about 30 basis points. National Australia Bank (NAB.AX) said it expected a minimal impact on its capital levels.

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