SYDNEY (Reuters) – Australian banks’ will see a fall in their capital buffers over the year ahead due to likely loan losses as hundreds of thousands lose their jobs due to the COVID-19 pandemic, the head of the prudential regulator said on Thursday.
The strong balance sheets of the country’s banks allowed them to play a role “as a shock absorber for the economy,” Wayne Byres, chairman of the Australian Prudential Regulatory Authority said on Thursday.
“That capital has been built up precisely so that banks are able, in times of stress, to absorb losses and sustain the flow of credit to the broader economy,” Byres said in his opening remarks in a webinar.
“Now is the time to allow that to happen. It means capital ratios will come down over the year ahead: that should surprise no one.”
(Reporting by Swati Pandey; Editing by Kim Coghill)