Commentary

DBRS: Higher Capital Requirements Manageable for Australian Banks

Banking Organizations

Summary

DBRS published a new commentary highlighting recent developments in the Australian banking system, with regards to higher capital requirements and increased regulatory ratios. This comes at a time when profitability will be pressured by the lowering of the base interest rate and elevated remediation costs.

Key Highlights include:
• The major Australian banks face additional capital requirements to address risk management weaknesses.
• The finalisation of the loss-absorption framework results in additional need for Tier 2 Issuance.
• The outcome of the evolving capital framework in New Zealand, where their local subsidiaries have a dominant position in the banking system, remains uncertain.
• Simultaneously, lower interest rates and higher remediation costs will likely impact profitability.