The major banks will have to increase their total capital by three percentage points of risk-weighted assets by 1 January 2024 to meet new requirements for loss-absorbing capacity.Bringing an end to a debate over reform set up by the Financial System Inquiry five years ago, APRA has determined that Australia's four big banks will have to raise around A$50 billion of additional capital.And in an immediate benefit, S&P yesterday "revised our outlooks on the four major Australian banks to stable from negative, and our outlook on Macquarie Bank to positive from developing".In a discussion paper released last November, APRA proposed that the Big Four banks be required to increase their total capital by four or five percentage points of risk weighted assets over four years.APRA released its response to submissions on the discussion yesterday, saying it remains committed to an overall long-term target of an additional four to five percentage points of loss-absorbing capacity."Over the next four years, APRA will consider the most feasible alternative method of sourcing the remaining one to two percentage points," the regulator said.APRA said that for small and medium ADIs the requirement for extra loss-absorbing capacity would be handled on a case-by-case basis.Together, the big banks will have to raise  around A$50 billion of additional capital. APRA said it expected that the banks would meet the bulk of this requirement by raising additional Tier 2 capital.NAB issued a statement saying that, based on its risk-weighted assets of A$403 billion at the end of March, the three percentage point increase represents an increase of $12.1 billion. ANZ said that, based on its RWA of $396 billion at the end of March, its total capital requirement would increase by $12 billion.Westpac said that, based on its RWA of $420 billion at the end of March, its total capital requirement would increase by about $13 billion.Commonwealth Bank said that, based on its RWA of $447 billion at the end of March, its total capital requirement will increase by about $13 billion. In their submissions to last November's discussion paper, the banks argued that there would be insufficient capacity in the debt markets to absorb the anticipated increase in Tier 2 capital if they were required to increase capital by four or five percentage points.APRA said: "In recognition of the concerns raised around market capacity for Tier 2 capital, APRA will set the increase in total capital requirements at three percentage points of RWA, instead of four to five percentage points."The banks also argued in their submissions that APRA's proposal would increase overall funding costs by more than five basis points, exceeding the estimate in the discussion paper. APRA rejected this argument.