Given new regulatory capital requirements in Australia, the country's four largest banks will need to increase their capital by A$36 billion to A$53.1 billion in aggregate to achieve total capital ratios of 17% to 18% by 2024, Moody's said Aug. 1.
Australia's four largest banks are Commonwealth Bank of Australia, Australia & New Zealand Banking Group Ltd., Westpac Banking Corp. and National Australia Bank Ltd.
The rating agency said the Australian Prudential Regulation Authority's decision to increase the banks' loss-absorbing buffers by raising the required minimum ratio of total capital to risk-weighted assets by three percentage points, combined with a prior move to increase capital requirements, will result in a substantial increase in capital at these banks by 2024.
Moody's expects the minimum total capital ratio for the banks to effectively rise to 17% by 2024 from the current 8% when the additional total loss-absorbing capacity requirement, a capital conservation buffer and an additional charge for domestic systemically important banks are taken into account. As a result, the banks will need to significantly boost issuance of securities that qualify as regulatory capital, the rating agency noted.
The aggregate additional capital needed will increase to A$75 billion to A$93.5 billion when other factors, including risk-weighted assets growth, are taken into account, the agency added.