May 1, 2015
Bank shares took a tumble of between 4 and 5% over the past three days on fears of a more aggressive APRA enforcing a 10% threshold on loans for property investment introduced in December to stop a property bubble building particularly in Sydney. APRA wants to implement proposals in David Murray’s financial system inquiry that banks hold “unquestionably strong” amounts of capital that would place them in the top quartile of global banks.
The global banking regulator is likely to impose increases in the amount of capital banks need to hold to protect against losses. On Wednesday APRA Chairman Wayne Byres was reported as saying he would act “sooner rather than later” to implement the financial system inquiry’s call for the banks to hold extra capital against mortgages, a move which would likely impact on bank profit and dividends.
Any cut in Australia’s AAA credit rating would likely lead to a downgrade in the bank’s ratings making it more expensive for them to borrow and lowering their profit.