ADIs have had mixed fortunes in their ongoing negotiations with APRA over its planned revision of the ADI capital framework. The regulator has dropped a proposal to include mortgage serviceability criteria in the framework but it is sticking with its plan to apply a flat risk weight of 100 per cent to non-standard mortgages.Yesterday, the Australian Prudential Regulation Authority released its response to consultation on revisions to the capital framework for authorised deposit-taking institutions.APRA's reform is designed to increase capital requirements to meet "unquestionably strong" benchmarks. APRA also wants to address the structural concentration in residential mortgages.To meet its "unquestionably strong" goal, APRA continues to target an overall increase in capital requirements of 150 basis points for ADIs that use the internal ratings based approach for determining capital adequacy for credit risk, and 50 bps for ADIs using the standardised approach.It says ADIs that already meet the "unquestionably strong" capital targets that APRA announced in July 2017 should not need to raise additional capital to meet new measures.In response to submissions on residential mortgage lending, APRA is now proposing to narrow the scope of residential mortgages that will be considered non-standard for credit risk purposes.The requirement that the property securing an exposure must be fully completed has been removed from the standard mortgage criteria. Examples of non-standard mortgages include reverse mortgages, loans to SMSFs and shared equity mortgages.APRA's proposal to embed serviceability criteria, such as interest rate buffers and floors, in the capital framework, was strongly opposed in industry submissions.In response, APRA says it is no longer proposing to include the requirement relating to the use of high loan-to-income multiples and that mortgages must be originated within an ADI's serviceability policy."While APRA does not intend to explicitly link these measures to the capital treatment of residential mortgages, it does expect that ADIs would include appropriate limits of this type of lending in their serviceability policies."APRA proposes to apply a flat risk weight of 100 per cent to all non-standard mortgages. Despite, submissions arguing that the proposed risk weight was punitive, APRA says it plans to stick with its proposal.APRA plans to segment residential mortgages into two categories: lower risk owner-occupied principal and interest loans; and higher risk mortgages, such as investor loans, interest-only loans and loans to SMEs secured by residential property.There are lower risk weights for credit cards and personal loans secured by vehicles. The response paper also details a simplified capital framework for small, less complex ADIs.