On 5 December 2025, the Australian Prudential Regulation Authority (APRA) published a Discussion Paper ‘A more proportionate banking prudential framework’.
Background
The Discussion Paper is part of the Council of Financial Regulators’ Review into Small and Medium-sized Banks and APRA’s commitment earlier this year to make the Australian banking prudential framework more proportionate. The Discussion Paper outlines how APRA proposes to better customise its banking prudential requirements based on size, risk profile and complexity of authorised deposit-taking institutions (ADIs).
Key proposals
In a Discussion Paper, APRA proposes creating a new tier of Most Significant Financial Institutions (MSFIs) for banks with more than $300 billion in assets. The second tier would cover all other banks that are significant financial institutions (SFIs), with the SFI threshold raised from $20 billion to $30 billion. The third tier, being non-SFIs, would include all remaining banks. Non-SFIs would be given additional time to comply with new or revised requirements, where appropriate, compared to banks in the other tiers. APRA also proposes to provide all banks with a transition period of at least 12 months to comply with higher prudential settings should they move to a higher tier.
Next steps
The deadline for comments on the Discussion Paper is 27 February 2026.
Informed by stakeholder feedback, APRA expects to finalise the proposal next year.