The Australian Prudential Regulation Authority (APRA) has begun consulting on proposed changes to its bank prudential and reporting frameworks to phase out Additional Tier 1 (AT1) capital instruments, APRA said in a Tuesday statement.
AT1 is intended to stabilize a bank and support its financial resilience, enabling it to continue operations and complement other recovery actions, such as raising capital and restructuring businesses, according to the APRA website.
APRA is seeking feedback on proposed amendments that give effect to the phase-out of AT1 capital instruments following its decision to phase out AT1 in December 2024.
The regulator intends to improve capital effectiveness in crises by removing AT1 as well as reduce compliance costs for banks and enhance proportionality by lowering the cost of capital for smaller banks relative to larger banks.
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