NAB: More capital is coming

In The AFR I examine a report from NAB's top credit analyst that argues the major banks will move to 10% common equity capital ratios---implying a current capital shortfall of $15.4bn---and that APRA's new total loss absorbing capacity (TLAC) regime will eliminate the implicitly government guaranteed status of the banks' highest-ranking bonds to give effect to the government's instruction that the regulator minimise the moral hazard that flows from the perception that these banks are too-big-to-fail. I also question APRA's insularity and why it has set the recently introduced counter-cyclical capital buffer, which is meant to boost capital during periods when asset prices, leverage and systemic risk are rising, at zero, or the bottom of its 0%-2.5% possible range "at a time when Australian dwelling prices have surged 34% since January 2013 (and 10% over the last year), the household debt-to-disposable income ratio has leapt from 169% to a record 187% over the same period (as credit growth has been trebling wages) and the house price-to-income ratio has exploded". Free: (VIEW LINK)