Bank capital management in the Covid-19 environment

Banks face an unprecedented and challenging time ahead as they navigate a downturn precipitated by a global pandemic. Fortunately Australian banks are well capitalised following implementation of post-GFC capital reforms and APRA’s unquestionably strong capital benchmarks. Going forward banks are likely to see higher losses from credit defaults as the government stimulus and APRA support winds back. Banks’ approach to capital management will need to adapt to this complex situation.

In this article, Sen Nagarajan, Finity’s banking industry specialist, looks at how banks can plan their capital planning, monitoring, and implementation activities across future time horizons given economic uncertainties in each economic period.