Banking (prudential standard) determination No. 3 of 2006 - Prudential Standard APS 110 - Capital Adequacy
Minimum capital adequacy requirementsMinimum capital adequacy requirements
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Minimum capital adequacy requirements
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An ADI must, at a minimum, maintain a risk-based capital ratio (refer AGN 110.4) of 8 per cent at all times under Level 1 and Level 2. At least half of the ratio must take the form of Tier 1 capital (refer APS 111) i.e. a minimum Tier 1 capital ratio of 4 per cent must be maintained. Where considered appropriate, APRA may require an ADI to maintain a minimum capital ratio above 8 per cent (at least half of the ratio must take the form of Tier 1 capital) at Level 1 and Level 2 (refer AGN 110.5). APRA expects all ADIs, as part of their capital management plans (refer paragraphs 3(b) and 5(a) above), to target and maintain Level 1 and Level 2 capital ratios (both Tier 1 and total) above regulatory minimums.
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ADIs subject to Level 3 capital adequacy assessment must meet the minimum group-wide capital adequacy benchmarks agreed with APRA on a continuous basis. APRA may impose additional or higher Level 1 and/or Level 2 capital requirements on an ADI in a conglomerate group where it is not satisfied with the methodology for measuring the group’s capital adequacy at Level 3 (refer AGN 110.3).