Agricultural Bank of China and Industrial and Commercial Bank of China proposed up to RMB 260 billion ($38.7 billion) in combined Common Equity Tier 1 capital support, while the Australian Prudential Regulation Authority (APRA) imposed additional capital, liquidity, reporting and remediation requirements on ING Australia after identifying material liquidity breaches. Together, the developments place capital capacity and the reliability of risk controls at the centre of this week’s banking-risk agenda. The Reserve Bank of India (RBI) moved to absorb excess liquidity with a 30-day INR 7 trillion ($74.1 billion) variable-rate reverse-repo operation, while UBS estimated that Swiss parliamentary recommendations could create approximately $13 billion of additional Tier 1 capital requirements at parent level. Fitch and the European Central Bank added broader perspectives on Basel III risk-weighted assets and synthetic securitisation, as US and Indian regulators advanced changes affecting supervisory materiality, transfer-agent controls and derivatives settlement. Read more on the week’s key developments: 1. ABC and ICBC propose up to RMB 260 billion ($38.7 billion) in CET1 support Agricultural Bank of China (ABC) and Industrial and Commercial Bank of China (ICBC) proposed capital replenishment plans of up to RMB 260 billion ($38.7 billion), comprising RMB 160 billion ($23.8 billion) for ABC and RMB 100 billion ($14.9 billion) for ICBC. The proposals remain subject to regulatory and shareholder approvals. The scale of the proposals makes this the week’s most significant capital development. The planned support would improve the banks’ CET1 capacity, giving them greater room to absorb risk-weighted-asset growth and maintain lending. However, the proposals are not yet completed capital increases, and their ultimate effect will depend on approval, funding structure and the timing of issuance. 2. APRA takes action against ING Australia over liquidity breaches The Australian Prudential Regulation Authority (APRA) imposed additional requirements on ING Australia after identifying material breaches of liquidity requirements. The measures include additional liquidity and capital obligations, enhanced reporting and a remediation programme to address the identified weaknesses. The intervention highlights how liquidity deficiencies can trigger prudential action even without a confirmed solvency problem. The focus is therefore not only on the size of ING Australia’s liquidity buffer, but also on the accuracy of its liquidity-risk measurement, the strength of its governance and the effectiveness of its escalation processes. The remediation timetable will help determine whether the breaches reflect a temporary reporting or process failure or deeper weaknesses in the bank’s risk controls. 3. RBI absorbs surplus liquidity through a 30-day $74.1 billion VRRR operation The Reserve Bank of India (RBI) announced a 30-day variable-rate reverse-repo operation (VRRR) for INR 7 trillion ($74.1 billion), with an early-redemption facility. The move follows a sharp increase in system liquidity, partly driven by foreign-currency deposits raised under a special scheme and subsequently swapped with the central bank. The operation extends liquidity absorption to a 30-day tenor while giving banks flexibility to exit early. The auction outcome and its impact on overnight rates will show whether the operation leads to a more sustained tightening of system liquidity or simply shifts surplus funds between banks and the central bank. 4. UBS estimates Swiss capital proposal could add $13 billion to Tier 1 requirements UBS said on 1 September that recommendations from Switzerland’s Economic Affairs and Taxation Committee of the Council of States (WAK-S) could increase the capital that UBS AG must hold to support its foreign subsidiaries. The proposal would raise the required Common Equity Tier 1 (CET1) capital support to 50%, from 45% currently, and allow for up to 50% Additional Tier 1 (AT1) capital support, compared with 17% under current law. UBS estimates the changes could require about $13 billion of additional Tier 1 capital at parent level, potentially through AT1 instruments. The proposal would add to about $2 billion of incremental CET1 requirements from ordinance-level changes and $15 billion previously disclosed following the Credit Suisse acquisition, taking UBS’s estimated additional Tier 1 requirements since the acquisition to around $30 billion. The estimate is based on UBS’s 30 June 2026 balance sheet and a 12.5% CET1 ratio. The proposal would affect both the amount and location of capital within the UBS group. Parent-level AT1 could provide an additional buffer against losses while UBS continues to operate, but it would not replace CET1 as the group’s core equity cushion. The recommendations could also increase UBS’s funding costs and reduce its flexibility to allocate capital to foreign subsidiaries. They remain a committee recommendation rather than enacted law, and the final requirement could differ from UBS’s estimate depending on the rules ultimately adopted, the capital mix and the applicable ratio assumptions. 5. Fitch expects Basel III to narrow differences in bank RWA density Fitch Ratings expects Basel III reforms to narrow differences in risk-weighted-asset (RWA) density across large banks. In 2025, RWA density averaged about 30% for European banks, 53% for US banks and 37% for Asia-Pacific banks. Fitch expects the ratio to rise in Europe and parts of Asia-Pacific, while US banks should see a smaller impact. The main concern is how much capital banks will have available for lending and other uses. Higher RWAs mean banks need to hold more capital against their assets, which can reduce room for lending, dividends and buybacks. Fitch cites European Banking Authority estimates that full implementation of the reforms could reduce the EU banking sector’s aggregate CET1 ratio by about 130 basis points, with the output floor accounting for around 110 basis points. The impact will vary depending on each bank’s business mix and how quickly the rules are implemented. 6. ECB highlights synthetic securitisation as a capital-allocation tool The European Central Bank published research on how synthetic securitisation can help banks transfer credit risk and use their regulatory capital more efficiently. Unlike traditional securitisation, banks generally keep ownership of the underlying loans but transfer some of the credit risk to investors. By transferring part of the risk, banks may reduce the capital they need to hold against a loan portfolio and use that capital for new lending. They can also keep the customer relationships and income from servicing the loans. The risk is not removed, however, as banks still face counterparty, legal and other risks. The amount of capital a bank can release also depends on whether regulators recognise the transaction for capital relief. 7. OCC and FDIC finalise a material-financial-risk supervisory framework The Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC) finalised a rule clarifying how they treat unsafe or unsound practices and matters requiring attention. Issued on 27 August, published in the Federal Register on 1 September and scheduled to take effect on 2 November, the rule focuses supervisory findings on practices that cause, or are likely to cause, material financial harm or significant risk to the Deposit Insurance Fund. The rule aims to give banks a clearer distinction between serious supervisory concerns and lower-level issues. This could make remediation priorities clearer and reduce uncertainty over when problems may lead to stronger supervisory action. Non-financial weaknesses, such as governance, compliance or operational problems, can still become significant if they lead to losses, liquidity or capital problems or legal exposure. 8. US SEC proposes first substantive transfer-agent update in decades The US Securities and Exchange Commission (SEC) proposed a broad update to its rules for registered transfer agents, marking the first substantive review of the framework in several decades. The proposal covers electronic and distributed-ledger recordkeeping, safeguarding of securities and funds, written compliance policies, business continuity and operational-risk management. The changes could strengthen an important part of securities-market infrastructure. Transfer agents maintain records of securities ownership and support the transfer of those securities, making the accuracy and resilience of their systems important to market operations. Stronger requirements for recordkeeping, asset segregation and business continuity could reduce operational and settlement risks. The proposal is not yet binding, and its impact will depend on the final rules, compliance costs and how firms adopt new technologies. 9. SEBI reviews derivatives settlement-price methodology The Securities and Exchange Board of India (SEBI) said it would review the settlement-price methodology for derivative contracts following the rollout of a new corporate-action system. The review is intended to assess whether existing settlement calculations remain appropriate when corporate actions affect the underlying securities. Settlement-price methodology affects the allocation of gains and losses between counterparties and can influence margin, collateral and dispute risk. The development is therefore a market-integrity issue rather than a routine technical adjustment. The key question is whether the review produces a methodology that remains robust during complex corporate actions without creating new opportunities for pricing disputes or inconsistent treatment across contracts. 10. BIS research links zombie firms to domestic and cross-border credit risk The Bank for International Settlements (BIS) published research on zombie firms in emerging Asia and their domestic and cross-border implications. The study examines how persistently weak companies can affect bank credit, investment and financial stability, including through links between domestic lenders and foreign financial institutions. The research highlights how weak corporate borrowers can create risks beyond individual bank balance sheets. Continued lending to companies with limited capacity to service their debt can delay the recognition of credit deterioration and tie up capital in low-productivity businesses. The findings point to the need for closer monitoring of restructuring, loan evergreening, sector concentration and cross-border exposures. However, the historical evidence should not be interpreted as a current estimate of potential losses. Risk and Capital Weekly Brief tracks developments affecting financial institutions’ credit risk, capital strength, liquidity and operational resilience. Subscribe via LinkedIn.
