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On September 10, the Australian Prudential Regulation Authority (APRA) announced proposed changes to the bank capital framework to improve crisis preparedness. The changes focus on simplifying capital requirements and replacing hybrid instruments (AT1 capital) with more reliable forms of capital during times of financial stress. Key Highlights: - APRA proposes phasing out AT1 capital instruments, replacing them with Tier 2 and Common Equity Tier 1 (CET1) capital, ensuring banks can absorb losses more effectively during crises. - Large banks would replace 1.5% of AT1 with 1.25% Tier 2 and 0.25% CET1 capital, while smaller banks would fully replace AT1 with Tier 2 capital. - The changes aim to enhance depositor confidence, reduce compliance costs, and simplify capital requirements, especially for small and mid-size banks. - The transition is proposed to begin in January 2027, with all AT1 capital expected to be replaced by 2032. APRA invites stakeholder feedback during the two-month consultation period on the proposed framework and its implementation. For more updates on financial regulations and crisis preparedness, unlock cutting-edge legal intelligence with a free subscription to our platform — join us today. Visit https://lnkd.in/gZmkUPim to know more. Credit: insuranceasianews #APRA #BankingRegulation #CrisisPreparedness #AT1Capital #FinancialStability #GRI #Australia

Earlier this week, the International Monetary Fund released part 2 of their #GlobalSystemicRiskReport which focused on the "Rise and Risks of Private Credit". Subscribe to our #AlternativesIntelligence substack to read our update and background on the report (as well as get future updates from the Capitol Asset Strategies team. If you or your team have any questions on the report and the challenges to private credit, please don't hesitate to contact us directly. #privatecredit #privatefunds #GPs #LPs #privatefundadvisers #systemicrisk #IMF #FSOC #alternativeinvestments #alternatives #alts

Interesting read. „…At the current juncture, structural vulnerabilities in NBFI could amplify cyclical risks to EU financial system stability owing to the impact of higher interest rates. Tighter financing conditions, coupled with slow growth, could amplify credit risk. This could lead to losses and put a strain on non-bank financial intermediaries engaged in liquidity transformation, especially those with direct exposures to interest rate-sensitive sectors such as real estate, or those that rely on leverage...“ Seems that regulators finally start to get that non-bank financial intermediation (NBFI) actually has the potential to pose risks to financial stability. Better late than never. Part of the story (unfortunately unmentioned here) is, though, that the growth of these less or unregulated sectors today offering NBFI is by no way a surprise development but to a good part the direct and forseeable consequence of incentives set by a decade long uneven regulation of similar risks across the financial system following the GFC. The rather intuitive concept of „same risks - same rules“ clearly has its merits. However, regulators and policymakers decided to unilaterally regulate the banking sector instead. Voilà. #banking #debt #lending #regulation #privatedebt #regulators #policymakers #ESRB #EU

At the recent DG FISMA technical workshop on macroprudential policies for Non-Bank Financial Intermediation (NBFI), EU Commissioner Mairead McGuinness delivered a keynote. Here are the highlights: 1️⃣ The urgency of addressing #NBFI is paramount. With a diverse range of entities, both regulated and unregulated, the sector's impact on financial stability cannot be overstated. 2️⃣ The EU is actively seeking to complete the Capital Markets Union (#CMU), but it requires strong political leadership to drive the necessary reforms. 3️⃣ The Commission is launching a consultation on #macroprudential policies for NBFI to assess the effectiveness of the existing framework and to improve coordination among supervisors. 4️⃣ The importance of international coordination in managing systemic risks was emphasized, with the EU engaging in forums like the FSB and IOSCO to ensure global #financialstability. 5️⃣ The need for large-scale investments to fund the transition to a #sustainablefuture was highlighted, with a call to harness the savings available for this purpose. 6️⃣ The peer review model among national and EU authorities has been effective, but there's a push to strengthen governance and reporting frameworks for better data sharing and risk detection. 7️⃣ The role of Money Market Funds (#MMFs) in short-term funding markets and the potential need to reinforce their legal framework was also discussed. Commissioner McGuinness' speech underscored the complexity and significance of NBFI in the financial ecosystem. 🗣️ Have your say during the consultation period. https://lnkd.in/eb_H6g59 #MacroprudentialPolicies #NBFI #FinancialStability #EUFinance #CMU #InternationalCoordination

The Financial Stability Board (FSB) has released a consultation report proposing a series of measures to bolster the ability of non-bank financial institutions to weather liquidity shocks. Here's our breakdown of the recommendations, with an example of how they could play out in practice. #hedgefunds #fsb #liquidity

Just published an ESMA #TRV article on the #risk exposures of securities markets and investment funds to the #realestate sector. Key findings: (1) Real estate firms have become increasingly indebted, with credit risk indicators starting to show signs of deterioration; (2) interlinkages with the banking system are important and arise through entity exposures and activities; (3) investment funds acquired a prominent role in financing real estate activities, with liquidity mismatches remaining a key vulnerability for this industry. Going forward, interest rate risk can be expected to continue to shape real estate market exposures.

Türkiye Garanti Bankası's recent tier two issuance, despite previous concerns, demonstrated strong investor interest, with the $500m 10-year non-call five bond receiving overwhelming demand, signaling no pricing punishment. According to an EM fund manager, the market's enthusiasm for Turkish risk overshadowed any lingering resentment: "There's this huge technical driver for Turkey. The country could be a really interesting rating story too — if upgrades follow, Turkey credit could easily move another 100bp-200bp tighter." Despite initial hesitations, #investors largely accepted Garanti's decision not to call its previous tier two, viewing it as financially prudent given the market conditions at the time. Sign up to read the rest of the article and further comments from market participants: https://lnkd.in/eUyCvc_2 Written by Francesca Young, emerging markets editor at GlobalCapital #capitalmarkets #emergingmarkets #turkey

🔔 APRA Proposes Key Updates to Bank Capital Framework to Boost Crisis Preparedness 🔔 The Australian Prudential Regulation Authority (APRA) has unveiled proposed updates to the bank capital framework, aimed at enhancing financial stability in times of crisis. These changes focus on phasing out AT1 capital instruments (hybrid bonds) and replacing them with more reliable capital forms to absorb losses more effectively. This initiative stems from lessons learned during recent global banking turmoil, where several major banks required government intervention. APRA’s new approach intends to simplify capital structures, ensuring smoother and more predictable bank resolutions while safeguarding depositor confidence. This follows an earlier consultation process that began in September 2023, seeking feedback on potential solutions for enhancing the effectiveness of AT1. Link to initial consultation. ✨Key Highlights: ◾Large banks will transition 1.5% AT1 to 1.25% Tier 2 and 0.25% CET1 capital. ◾Smaller banks can fully replace AT1 with Tier 2 capital. ◾Changes will be phased in from January 2027, with full replacement by 2032. ◾No immediate impact on current AT1 instruments, which remain eligible until their first call dates. 📢 APRA is inviting feedback from stakeholders during the current two-month consultation period. This proposal underscores the regulator’s commitment to protecting Australia’s financial system while maintaining banks’ “unquestionable strength.” 👉For more details, read APRA’s discussion paper here : https://lnkd.in/e6beKgDY #APRA #Banking #CapitalFramework #FinancialStability #AGILE #RegTech #Vermeg

Pepper MarketScope Navigating the complexities of AIFMD II: Ensuring financial stability in the growing private credit market. Through this article, we explore the key challenges and opportunities presented by the AIFMD II regulations amidst the rapid growth of the private credit market. Key takeaways: 1) Regulators are balancing the need to support business growth with concerns about financial stability 2) AIFMD II introduces new rules to address potential risks associated with private credit 3) Data transparency and liquidity management are crucial for ensuring market stability Curious to learn more? Check out the article https://lnkd.in/dvtC_q5R #privateequity #venturecapital #alternativeinvestments #financialmarkets #investment #growth #financialadvisors #wealthmanagement #financialtechnology #aifmd #privatedebt #financialregulation

I had the pleasure of sitting down with Nicholas Chaplin, Director & Portfolio Manager at Seed Funds Management, to discuss the potential ramifications of APRA's proposal to phase out Additional Tier 1 (AT1) bonds. Nicholas offered valuable insights on why this move could potentially undermine banking stability and leave retail investors more exposed. A must-watch for anyone with an interest in banking regulations, hybrid securities, and investment strategies. Key Topics We Discussed: APRA’s proposal and its implications Current issues surrounding AT1 instruments Australian banks' stability and the transition timeline Impact on banks (both large and small) and retail investors Alternative solutions to the phase-out How the market has reacted so far Tune in to hear from one of the industry's most experienced investors! 👇 #banking #investing #AT1 #financialmarkets #retailinvestors #APRA #hybridsecurities #finance #investmentstrategies