ZILELI We have all made submissions on the future of risk weights and we are waiting on the outcome. I believe this is going to be rolled up in a forthcoming paper covering the nature of “unquestionably strong” capitalisation. That is due at the end of this year – though it has already been pushed back.

We are also awaiting a discussion paper on total loss-absorbing capacity (TLAC), but again this seems to have been delayed. No doubt this will emerge at some point.

KAU The risk-weight issue is in train, and it will have a flow-on impact on the attractiveness of capital-relief residential mortgage-backed securities. This could potentially be quite an important development.

PERRIGNON Recalibration of risk weights should be a good story for investors. It suggests the Australian regulator is seeking better to align asset risk with capital in banks’ portfolios – which should be a message of further strength in the balance sheet.

BISCHOFF Yes, but the Australian Prudential Regulation Authority (APRA) has already made it clear that notional value of capital is done at 10.5 per cent. I don’t think investors will assume that a higher calibration makes us structurally stronger.

ROBB The allocation approach might be tidier, but if the absolute number is no bigger investors won’t attribute much change to the credit profile.

KAU APRA has already stated that it is not changing the absolute capital number we need to hold.

KAU Risk weights aren’t growing particularly fast and our tier-two need is a function of risk weights. Investors are asking the same question about tier-two supply, and on a regular basis. But with balance sheets not growing particularly fast it’s really a refinancing story. In our case, we issue about A$1-2 billion (US$740.1 million – US$1.5 billion) a year and we don’t see this changing in the near future.

BISCHOFF What we saw in 2014-16 was a period in which a lot of old Basel II instruments rolled off and the refinancing need was consequently quite high. The need is lower now given reduced maturities, and while APRA’s calibration of the capital framework could prompt a slight increase in issuance we don’t expect it will be significant.

ROBB We have done two tier-two transactions in the past year: a euro 12-year non-call seven and 30-year US dollars. At this stage we are well positioned for tier-two. While we also get a lot of questions from investors about tier-two issuance expectations, we don’t have any near-term needs.

KAU I was in Sydney in early August where I met a dozen investors, and after mortgages and the royal commission the next most popular question was about tier-two.

ROBB It continues to be a positive sign that investors move very quickly from talking about the big risk factors to asking for sub-debt issuance.

ZILELI They want the yield. If investors are happy with a bank’s credit they tend to be happy with its tier-two issuance.