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ARTICLE · 15 SEPTEMBER 2024

Phasing out bank AT1 capital instruments (Capital Notes): a significant development from APRA

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Proposal to phase out the use of AT1 capital instruments by banks.

AustraliaFinance and Banking
Jo Dodd
Jo Dodd
Chloe Delahunt-Devlin
Chloe Delahunt-Devlin
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The Australian Prudential Regulation Authority (APRA) released a discussion paper on 10 September 2024 (Discussion Paper) outlining its proposal to phase out the use of AT1 capital instruments by banks for their capital adequacy requirements in favour of cheaper, more reliable and more effective forms of capital.

The proposal represents a significant shift away from the accepted regulatory approach to bank failure following the global financial crisis (GFC) in 2008. It is a decision which may see Australia become the first jurisdiction to phase out AT1 instruments. APRA's view is that simplifying the capital framework for banks will strengthen the crisis preparedness of the Australian financial system.

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