Australia's bank watchdog proposes countercyclical capital buffer of 1%

[SYDNEY] Australia's banking regulator on Monday said it plans to increase a requirement that banks maintain a "countercyclical capital buffer" to protect them from future potential losses to 1 per cent of assets.

"We see benefit in having a requirement that can be dialled up, and down, in response to the peaks and troughs of the economic cycle," APRA Chair Wayne Byres told a UBS conference.

"We propose to utilise a default setting of 1 per cent for the Countercyclical Capital Buffer, giving us scope to adjust this over time in response to conditions."

The buffer, which seeks to add to banking resilience when high levels of debt increase system-wide risks, has been maintained at zero of risk weighted assets since the policy was introduced in 2016.

REUTERS