| Type of policy response | Status | Finalisation | Implications | |
| POLICY MEASURES | ||||
|
Review of the
Standardised
Approaches
|
Credit Risk |
Consultation by end-
2014
|
End-2015 |
Revisions of standardised risk
weighting may benefit the
regional banks
|
| Market Risk |
Second public
consultation completed
|
End-2015
|
||
| Operational Risk |
Proposed revisions
published October 2014
|
Mid-2015
|
||
| Capital floors |
Replacement of the Basel II transitional floor with a
permanent floor based on the Standardised
Approaches for credit, market and operational risk
|
Consultation by end-
2014
|
End-2015 |
Higher capital floors will
increase the level of capital
required
|
|
Credit risk internal
models
|
Constraints on credit risk model parameter estimates
(eg LGD parameter for low-default exposures;
maturity of revolving facilities; simplification and
harmonisation of the credit risk mitigation framework)
|
Consultation by mid-
2015
|
End-2015 |
Constraints could be put on
credit risk internal models
which could result in higher
capital requirements. Also, the
IRB and Standardised risk
weights could become more
comparable.
|
|
Alignment of definitions of exposures under IRB and
revised Standardised Approaches
Guidance to support the risk models framework (eg
validation of risk models; "margins of conservatism"
in model estimates; definition of default; partial use of
risk models)
|
||||
|
Market risk internal
models
|
Greater standardisation of traded market risk model
requirements (eg use of historical data; treatment of
correlation; estimation of default)
|
Second public
consultation completed
|
End-2015 |
Standardisation of traded
market risk is likely to have an
impact on the level of capital
the institutional business
needs to hold
|
| Leverage Ratio |
Complementary measure aimed at restricting the
build-up of excessive leverage and at mitigating
model risk
|
Exposure definition
finalised - monitoring
and calibration 2015-17
|
Disclosure 2015 -
Implementation
2018
|
Australian banks are amongst
the most highly levered
internationally. Additional
emphasis on the leverage ratio
could force the majors to
reduce their level of leverage.
|
| DISCLOSURE | ||||
| Enhanced disclosure |
Improvements to existing disclosures to describe
different risk model approaches
|
Policy released for
consultation
|
End-2014 |
Increases the cost of
compliance
|
| Additional disclosure requirements |
Policy under
development
|
End-2015
|
||
| ON GOING MONITORING | ||||
|
Additional analysis
and ongoing
monitoring
|
Analysis of retail and small and medium-sized
enterprise credit portfolios
|
Analysis ongoing | End-2015 |
Increases the cost of
compliance
|
| Analysis of off-balance sheet lending commitments | ||||
| Framework review |
Strategic review of the capital framework against
Committee objectives
|
Review under way |
Increases the cost of
compliance
|
|
| Source: Macquarie Research, November 2014 | ||||