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pc nid 92635 May 20, 2026 kgurnani@vixio.com Australia Federal Register of Legislation horizon scanning
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Australia's Department of the Treasury Issues Banking Prudential Standard Determination Number One

On May 18, 2026, Australia's Department of the Treasury issued Banking (prudential standard) determination No. 1 of 2026, a legislative instrument establishing prudential standards for the banking sector. The determination came into force on the same date and is administered by the Department of the Treasury. The determination sets out regulatory requirements designed to ensure the prudential soundness and stability of Australian banks. Prudential standards typically address capital adequacy, liquidity management, risk management frameworks, and governance arrangements that authorised deposit-taking institutions must maintain. The instrument applies to all banks operating under the Banking Act 1959 and establishes baseline requirements for prudential risk management and financial resilience. The determination is available in both Word and PDF formats, with the legislative instrument comprising 31 pages and an accompanying 11-page explanatory statement that outlines the rationale, key provisions, and implementation details. The explanatory statement provides context for the regulatory changes and guidance on compliance obligations for affected institutions. Banks and other authorised deposit-taking institutions subject to the determination must ensure compliance with its provisions. The instrument represents an update to the prudential regulatory framework and may require institutions to review their existing policies, procedures, and systems to align with any new or modified requirements. Institutions should consult the full text of the determination and explanatory statement to identify specific compliance obligations applicable to their operations. REFERENCES: Federal Register of Legislation. Banking (prudential standard) determination No. 1 of 2026. Available at: https://www.legislation.gov.au/

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Australia's Department of the Treasury Issues Banking Prudential Standard Determination No.1

On May 18, 2026, Australia's Department of the Treasury issued the Banking (prudential standard) determination No. 1 of 2026, a legislative instrument establishing prudential standards for the banking sector. The instrument revokes the previous 2024 version of the standard. It applies to authorised deposit-taking institutions (ADIs) and authorised non-operating holding companies (NOHCs), excluding foreign ADIs and purchased payment facility providers. The prudential standard sets out APRA’s requirements for capital adequacy, including minimum capital ratios, internal capital assessment obligations, leverage ratio requirements, capital buffers, and notification obligations. The overarching objective is to ensure ADIs maintain sufficient capital to absorb losses and manage risks arising from their activities. Key requirements include: ADIs must: maintain an Internal Capital Adequacy Assessment Process (ICAAP), maintain minimum levels of regulatory capital, operate capital conservation and countercyclical capital buffers, notify APRA of material capital concerns or breaches, and obtain APRA approval before planned capital reductions. Boards are made explicitly responsible for ensuring capital levels remain appropriate relative to the institution’s risk profile, including group contagion, funding, cross-border, and operational risks. The ICAAP requirements are extensive and include: stress testing, capital planning, risk monitoring frameworks, capital triggers, governance and reporting arrangements, and a mandatory ICAAP summary statement. ADIs must conduct regular independent reviews of the ICAAP at least every three years and submit annual ICAAP reports to APRA detailing capital projections, stress testing outcomes, business risk changes, and capital management actions. The standard also establishes minimum prudential capital requirements (PCRs): Standardised ADIs must maintain: Common Equity Tier 1 (CET1) Ratio: 4.5%; Total Capital Ratio: 8.0% IRB (internal ratings-based) ADIs must maintain: CET1 Ratio: 6.0% and Total Capital Ratio: 9.25% The prudential standard introduces or maintains restrictions on capital distributions when capital ratios fall within specified buffer ranges. Restrictions may affect dividends, share buybacks, discretionary AT1 payments, and staff bonus payments. The standard also requires APRA approval for planned reductions in capital, including: share buybacks, redemptions of capital instruments, and dividend payments exceeding statutory earnings. ADIs are additionally required to notify APRA of: actual or anticipated breaches of capital requirements, significant ICAAP departures, concerns regarding capital adequacy, or adverse market developments affecting capital instruments. The new prudential standard is effective from January 1, 2027.