Exploring the Impact of Capital Requirements on the Pricing of Loans

08
Sep 15
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Banks are particularly focussed on capital settings, and the impact of regulatory change on customers, product, pricing, capital, systems and technology.

The expected impacts of the recent Financial System Inquiry, ‘Basel IV’ and Total Loss Absorbing Capacity are currently being calibrated. In addition, the focus on international harmonisation presents interesting challenges for domestic regulation.

The regulatory change represents a significant shift for industry as regulators push for increased safety. Ultimately the goal is to reduced risk to government and taxpayers, but this will necessarily come at a cost to efficiency.

The forthcoming Capital Adequacy & Planning Conference presents opportunities to explore these themes and understand what they might mean for bank strategy and loan pricing in particular.

Expect more to follow

This is an area of significant change, with multiple interactions across the range of proposed regulation. Boards will expect management to be across the detail and formulating strategies to succeed in the new regulatory environment. This may have implications for product design and pricing. Recent changes as a result of APRA’s use of macroprudential tools, against a backdrop of the FSI, have shown the significance of this wave of change. We can expect more to follow.

The mortgage market in particular is receiving scrutiny by domestic regulators, and is also captured in various international reviews. It is somewhat ironic that this market, domestic in its focus, is so impacted by regulation initially designed for international exposures.

The conference session on the mortgage market will be an opportunity to explore issues around: Cost of capital; impacts on pricing and case studies from other regions; drivers of pricing; front-book and back-book strategies; and exploring the relevance of regulatory and economic capital.

Gordon Allison will be speaking on ‘Exploring the impact of capital requirements on the pricing of loans’ at the Capital Adequacy & Planning Conference in November. Book your place by September 18th to save $300.

Capital Adequacy and Planning

Submitted by Gordon Allison

Gordon Allison

Gordon Allison is the Head of Treasury Development and Transformation, Group Treasury, National Australia Bank. This role manages regulatory change impacting Treasury capital, funding and liquidity.

Gordon’s roles at NAB over the past 9 years have included: Personal Bank, Business Bank, Product & Markets, Finance and Operations. This has involved developing, managing and optimising the capital, funding and liquidity position of the Australian bank; developing risk frameworks and plans for interest rate risk, FX risk, securitisation, liquidity and funding risk, and engagement with regulators and rating agencies. He was also involved in managing the Group’s funding and liquidity position through the GFC.

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