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APRA maintains countercyclical capital buffer, revises exposure rules for banks

The Australian Prudential Regulation Authority on Dec. 7 said it maintained the countercyclical capital buffer for Australian authorized deposit-taking institutions at zero percent and announced revised rules on large loan exposures of ADIs.

ADIs include banks, building societies and credit unions, according to APRA.

APRA, which quarterly reviews the buffer, kept it unchanged in view of the improving quality of lending and the regulator's prudential measures on housing lending standards and establishment of benchmarks on investor lending growth and interest-only lending.

The buffer's purpose is to increase the ADIs' capital requirements during periods when excess credit growth contributes to the build-up of systemic risk.

APRA also announced revisions to its prudential framework governing large exposures. For example, the revised framework requires ADIs to meet the new limit of 25% of Tier 1 capital for their exposures to unrelated ADIs by Jan. 1, 2019.

APRA said core to the revised framework is the reference to Tier 1 capital as a basis for determining large exposures, re-calibrating existing large exposure limits and introducing a lower limit on domestic systemically important banks to D-SIB exposures, among others.

ADIs are expected to start implementing most of the revised framework called Prudential Standard APS 221 Large Exposures (APS 221) by Jan. 1, 2019.