SYDNEY • Australian banks have one year to raise US$7 billion (S$9.6 billion) under new rules requiring a bigger cash buffer, a move widely expected to hit profits and push up mortgage rates, slowing a real estate rush that has economists warning of a property bubble.
The financial regulator yesterday also said large banks and mortgage rival Macquarie Group may have to raise more in future as Australia shifts from letting property lenders decide cash reserves to making them follow global standards.
The Australian Prudential Regulation Authority's (Apra's) July 2016 deadline for banks to have cash reserves at 25 per cent of mortgage books, from 16 per cent now, adds urgency to a sector-wide restructuring that has already seen lenders raising billions of dollars and selling assets in preparation.
The capital increase is part of the regulators' attempt to ensure the financial system can cope with any downturn in the housing market, where prices have soared almost 30 per cent in the past three years.
Australia & New Zealand Banking Group, Commonwealth Bank of Australia, National Australia Bank, Westpac Banking and Macquarie Group will be affected by the new rules, which equate to increasing minimum capital requirements by about 80 basis points, Apra said.
The cost of holding more capital may force the lenders to raise their mortgage rates, according to Morningstar and Bell Potter Securities.
The increase is "consistent with the direction of work being undertaken by the Basel Committee on Banking Supervision on changes to the global capital adequacy framework for banks", Apra said. The measure "will enhance the resilience" of the affected banks and the broader financial system.
The move will calm investors wary of bank stocks since late 2014, when a government inquiry recommended the change, sending the sector down 8 per cent since March, outpacing the broader market's 5.4 per cent decline.
"It clears it out of the way," said Bell Potter analyst T. S. Lim. "There is enough time for the banks to get it in order. They are well prepared."
Shares of Commonwealth Bank of Australia, the biggest lender, were flat yesterday, in line with the market, as analysts said it can likely raise A$3.8 billion (S$3.8 billion) with a dividend reinvestment plan.
National Australia Bank also traded flat. It has the least to raise, about A$480 million, since it recently closed a A$5.5 billion rights issue and plans to list its UK unit.
The No. 2 lender Westpac Banking fell 0.3 per cent. It said it must raise A$3 billion. Shares of ANZ, which said it needs to raise A$2.3 billion, rose 0.8 per cent.
Macquarie Group, the only other lender to which the new rules apply, saw its shares rise 2 per cent after it said it could cover extra capital requirements from reserves.