Basel III capital hike is not a problem for APAC

Most of banking jurisdictions in most Asia Pacific markets should be able to absorb the moderate increases in capital requirements stipulated under the final Basel III standards.

Their conservative regulatory approaches, and less extensive use of internal models, will be to their advantage, Fitch Ratings reported.

“Few have implemented the rules in full so far, but we expect the transition will not have a substantial impact on capital requirements over the next two years–by which time adoption should be complete in most major APAC jurisdictions,” Fitch said.

Amongst markets, Australia and Indonesia have notably made strides in Basel III adoption. Australia has already adopted the final Basel III package, beginning 1 Jan. 2023, which resulted in reported domestic bank common equity Tier 1 ratios improving by up to 100bp for the major banks.

Indonesia’s pilot application of revised standardised approaches from January 2023 improved Tier 1 capital ratios initially by up to 300bp, Fitch noted.