The Australian Prudential Regulation Authority (APRA) has published an update on its macroprudential policy settings, explaining the key factors that have informed current levels.
This paper provides greater transparency on macroprudential policy in line with APRA’s which was published in 2021.
Macroprudential policy is an important feature of APRA’s toolkit. It involves policy measures aimed at promoting stability at a systemic level. In an information paper released today, APRA confirmed its view that existing policy settings remain appropriate based on the current risk outlook. The operative settings are:
- a neutral level for the countercyclical capital buffer of 1.0 percent of risk weighted assets, providing a buffer in bank capital for stress if needed; and
- a 3 per cent serviceability buffer to maintain prudent lending standards.
APRA Chair John Lonsdale said the settings remained appropriate given the potential for domestic and global economic conditions to deteriorate.
“APRA closely monitors financial risks, and we see a high degree of uncertainty in the broader outlook, globally and domestically. On the one hand, there are signs of a deterioration in conditions, including falling asset prices and the potential for pockets of stress. On the other hand, lending standards are broadly sound, loan arrears remain low and the banking system is well capitalised.
