The Australian Prudential Regulation Authority (APRA) has issued a discussion paper consulting on a formal three-tier approach to proportionality in its banking prudential framework, aimed at embedding additional differentiation by size and complexity. The proposals follow APRA’s commitment under the Council of Financial Regulators’ Review into Small and Medium-sized Banks. Under the proposal, a new tier of Most Significant Financial Institutions (MSFIs) would apply to banks with more than AUD 300 billion in assets, which would currently include the four major banks and Macquarie Bank. The second tier would cover all other significant financial institutions (SFIs), with the SFI threshold raised from AUD 20 billion to AUD 30 billion, and the third tier would comprise all remaining banks, including credit unions and building societies. Additional implementation time would be available for non-SFIs for new or revised requirements where appropriate, and APRA proposes a transition period of at least 12 months for any bank moving to a higher tier. Consultation runs for three months, and APRA expects to finalise the proposals in 2026.
Australian Prudential Regulation Authority 2025-12-05
Australian Prudential Regulation Authority consults on three-tier banking prudential framework with new Most Significant Financial Institutions tier
The Australian Prudential Regulation Authority (APRA) has proposed a three-tier proportionality approach in its banking prudential framework, differentiating by size and complexity. Banks are categorized as Most Significant Financial Institutions (assets over AUD 300 billion), Significant Financial Institutions (threshold raised to AUD 30 billion), and a third tier for others, including credit unions. APRA suggests at least a 12-month transition for banks moving to a higher tier, with extra time for non-SFIs to implement new requirements.