The Australian Prudential Regulation Authority (APRA) has confirmed it will phase out the use of Additional Tier 1 (AT1) capital instruments to simplify and improve the effectiveness of bank capital in a crisis.
Following an extensive consultation process beginning last year and careful consideration of the potential options, APRA launched a consultation in September on a proposal to require banks to replace AT1 – also known as hybrid bonds – predominantly with cheaper and more reliable forms of capital that would absorb losses more effectively in times of stress.
The move is one of a number of changes APRA introduced in response to lessons from last year’s overseas banking turmoil where several…
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