Aussie banks told to boost mortgage capital

Sydney

AUSTRALIA'S biggest lenders will have to set aside more capital against potential losses on home loans, the nation's banking regulator said on Monday in its latest move to bolster the financial system.

Under rules coming into force on July 1, 2016, the average risk weight on residential mortgage exposures will rise to at least 25 per cent from about 16 per cent, the Australian Prudential Regulation Authority said in a statement. That will increase the capital requirements of the biggest four banks by about A$12 billion (S$12.15 billion), according to Goldman Sachs Group Inc and Morgan Stanley.