Australian Prudential Regulation Authority consults on lower bank credit risk weights for infrastructure unrated corporates and some residential development lending

The Australian Prudential Regulation Authority has released a consultation paper, draft standards and guidance proposing targeted changes to credit risk capital requirements for authorised deposit-taking institutions. The measures would make standardised risk weights more risk sensitive in selected areas of corporate lending, including lower risk weights for large domestic public infrastructure exposures, high-quality unrated corporate exposures that meet specified criteria, and broader eligibility for the 100 per cent risk weight for residential land acquisition, development and construction exposures. APRA says the changes are intended to support productive lending and investment while preserving its "unquestionably strong" capital settings. The credit risk consultation is the first of three workstreams in APRA's broader package of capital and liquidity reforms for banks. APRA expects the package to be broadly cost neutral across the industry and to strengthen financial resilience, with separate consultations on liquidity risk and market risk to follow. In the broader reform program, APRA has also flagged tighter and more internationally aligned liquidity settings and a simplified approach to the Basel Committee's Fundamental Review of the Trading Book. APRA intends to finalise the credit risk capital changes in the second half of 2026, with a proposed effective date of 1 April 2027. Consultations on liquidity risk and market risk are due over the next 12 months.