The Australian Prudential Regulation Authority (“APRA”) has released for consultation a discussion paper outlining its proposed implementation of the Basel III capital reforms in Australia. APRA proposes to broadly adopt the minimum Basel III requirements for the definition and measurement of capital for authorised deposit-taking institutions (“ADI”).  Alignment will require APRA to amend its current policies in a number of areas, taking a stricter approach than at present in some but a less conservative approach in others.  In certain areas, however, there are strong in-principle reasons to continue APRA’s current policies; these involve the treatment of deferred tax assets, investments in non-consolidated financial institutions and investments in commercial institutions.  

APRA also proposes to introduce the new Basel III capital buffer regimes and the leverage ratio.