The share prices of Australia and New Zealand Banking Group (ASX: ANZ) and National Australia Bank Ltd (ASX: NAB) may be rising today because they could convince APRA (the bank regulator) not to force them to raise $75 billion of Tier II bonds.
ANZ and NAB are two of Australia’s largest banks and form part of the ‘Big Four’ banking group with Commonwealth Bank of Australia (ASX: CBA) and Westpac Banking Corp (ASX: WBC).
Why NAB and ANZ shares may be rising
The Australian Financial Review’s Jonathon Shapiro has reported that the big banks are trying to convince the Australian Prudential Regulation Authority (APRA), the banking regulator, not to force them to raise $75 billion of ‘Tier II’ bonds to meet the capital requirements to be “too big to fail”.
If forced, the big banks have estimated they would have to raise at least $67 billion, which represents around 7% of their risk-weighted assets. The banks argue the global market for Tier II bonds may not be large enough for the required amount and it would swamp the market.
Making the banks more capitalised makes them safer for shareholders and the economy as a whole, however, it does reduce the profitability during the good times.
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Disclaimer: Any information contained in this article is limited to general financial/investment advice only. The information has not taken into account your specific needs, goals or objectives, so please consider consulting a licenced and trusted adviser before acting on the information. Please read The Rask Group’s Financial Services Guide (FSG) for more information. This article is authorised by Owen Raszkiewicz of The Rask Group, which is a corporate authorised representative No. 1264179 of Strawman Pty Ltd (ACN: 610 908 211) (AFSL: 501 223).