Capital standards should be set so that the capital ratios of deposit takers are unquestionably strong, according to ARPA chairman Wayne Byres.
Speaking at the A50 Australian Economic Forum in Sydney on Friday, Byres outlined the APRA's agenda for 2017, including their main policy item of implementing the first recommendation of the Financial System Inquiry; forcing big banks to raise more capital.
Byres noted while APRA had been holding off until the work in Basel on the bank capital regime was complete, the regulator would no longer continue to wait.
"We have been doing quite a bit of thinking on this issue, but had held off taking action until the international work in Basel on the bank capital regime had been completed," Byres said.
"Unfortunately, the timetable for that Basel work now seems less certain, so it would be remiss of us to wait any longer."
Bynes is confident in the banking industry's ability to meet future policy changes, noting the industry had been "assiduously building its capital strength in anticipation."
"The major banks have added in the order of 150 basis points to their CET1 ratios over the past couple of years," he said.
"Assuming the industry continues to steadily build its capital, we expect it will be well placed to respond to policy changes in an orderly manner."
Byres' remarks coincide with the release of the International Monetary Funds' annual review of the Australian financial system, which noted Australia's robust economy despite commodity price and mining investment bust.
The IMF encouraged Australian authorities to remain vigilant and continue to enhance the resilience of the banking system to shocks with macro-financial implications, including by encouraging banks to strengthen their capital position.
"Financial regulatory authorities would need to stand ready to intensify targeted prudential measures, if lending or house price growth were to re-accelerate, while advancing the implementation of the regulatory reform agenda," the review said.
Federal Treasurer Scott Morrison welcomed that IMF review, highlighting the need for the government to press ahead with a program of "fiscal consolidation, while supporting jobs and growth through policies that will boost infrastructure, innovation and investment."
APRA's policy agenda items for 2017 also include a focus on housing and investment in new and existing technology platforms.