On 29 June 2026, the Australian Prudential Regulation Authority (APRA) issued a consultation paper, Getting the balance right on financial resilience – Workstream 1: Credit risk capital.
The consultation paper follows APRA’s previous commitment to consult on reforms to bank capital and liquidity settings. It is the first of three work steams that address credit risk capital, liquidity risk and market risk capital. APRA intends to consult on liquidity risk and market risk capital during the next twelve months.
Key proposals
Key proposals in the consultation paper include:
- Infrastructure lending – to allow a lower risk weight for large domestic public infrastructure exposures.
- Unrated corporate lending – to allow a lower risk weight for high-quality unrated corporate exposures subject to certain criteria.
- Land acquisition, development and construction (ADC) lending – to adjust criteria to allow for more exposures to qualify for the lower 100 per cent risk weight for residential property development.
APRA expects these measures to increase authorised deposit institutions’ (ADIs) lending capacity and support investment, while remaining consistent with APRA’s commitment to an ‘unquestionably strong’, risk-based capital framework. APRA expects the changes to also provide more flexibility for internal ratings based (IRB) ADIs that are currently bound by the standardised floor. The standardised floor restricts the capital benefit that IRB ADIs can access from using internal models to estimate risks to 72.5 per cent of the risk-weighted assets calculated using the standardised approach.
Next steps
The deadline for submissions on the consultation paper is 7 September 2026. APRA intends to finalise changes in late 2026, for a proposed effective date of 1 April 2027.