Bank Note$: Enough room now to swing a cat.

APRA announced an increase in the capital requirements for residential mortgages under the IRB approach. This move should come as no surprise with the major banks already having extensively gamed a 25-30% mortgage risk weight scenario. Our view remains that the major banks will not need to raise external capital but rather they will be creative in terms of adjusting their respective DRPs in the coming years. Our analysis suggests MQG and NAB are the clear winners while the impact on ANZ is not as detrimental as the market has been led to believe. The resilience of NAB and ANZ relative to WBC and CBA is also underpinned by much lower earnings dilution. Finally, regional banks on the way to accreditation are clear winners while BOQ should also benefit in due course. Read our full analysis (VIEW LINK)