APRA Updates Guidance On Capital Management For Banks And Insurers

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APRA Updates Guidance On Capital Management For Banks And Insurers

APRA has revised its capital management guidance for banks and insurers, especially easing restrictions around paying dividends as institutions continue to handle the disruption caused by COVID-19.

After a slight drop in the uncertainty in economic outlook, APRA reviewed the financial projections and stress testing results. Considering these developments since April into account, APRA wrote to banks and insurers recommending them to maintain caution in planning capital distributions, which include dividend payments.

APRA also indicated that the Board should

  • retain a minimum half of their earnings when making decisions on capital distributions.
  • conduct regular stress testing to inform decision making and demonstrate the ongoing lending capacity.
  • Utilize capital buffers to absorb the effects of stress and continue to lend to help households and businesses.

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