Carbon Pricing

Mr Fletcher asked the Assistant Treasurer, in writing, on 15 June 2011:

(1) Has the Australian Prudential Regulation Authority (APRA) assessed the likely impact of the Government's proposed carbon tax on Authorised Deposit-taking Institutions (ADIs), including loan delinquency levels, and whether ADIs would have adequate capital to cover increased delinquency levels; if so, what assessment was undertaken, and what was the outcome.

(2) Has APRA requested that ADIs examine the likely impact of the Government's proposed carbon tax on their loan books, and whether they would have adequate capital to cover increased delinquency levels; if so, what requests were made, and what was the outcome.

(3) What scope is there for APRA to increase the capital adequacy minimums imposed on ADIs to cover the potential increased risk of default from both the residential and commercial loan books arising from the proposed carbon tax.

Mr Shorten: The answer to the honourable members question is as follows:

APRA has not specifically assessed the potential impact on ADIs of the carbon pricing mechanism nor has it requested ADIs to undertake their own assessments. APRA generally only assesses the impact of external influences on ADIs where, in APRA's view, there is likely to be a material adverse impact. Given that the carbon pricing mechanism has only been in place for a short period , it is premature to consider whether the carbon pricing mechanism will have a material impact on ADIs' asset quality.