In a presentation last week, two of S&P Global Ratings financial institutions directors outlined the agency's outlook for the Australian banking sector in 2019.The main message was that the "benign" economic conditions will continue, as will the historic low levels of mortgage market loss levels. And the fallout from the Hayne royal commission - especially as it relates to the major banks - was not as high on S&P's list of pressure points for the sector as was a fall in house prices or the Reserve Bank of New Zealand's proposed increase in tier 1 capital requirements."Over the longer term, the outcome of the royal commission will be a strengthening around culture and governance," said Nico De Lange, financial institutions ratings director at S&P. Of greater interest to the rating agency's financial services analysts was the potential impact of the RBNZ's proposed changes to banks capital requirements, outlined in a series of discussion papers published late last month.One of the RBNZ capital review papers, titled "How much capital is enough?" posits an increase in minimum regulatory Tier 1 capital equivalent to: •    16 per cent of risk-weighted assets for systemically important banks; and•    15 per cent of RWAs for all other banks.The RBNZ's discussion papers also proposed the harmonisation of the IRB and standardised approaches.Notes accompanying the S&P webinar showed that if the new ratios are implemented, the Tier 1 capital requirement for major banks would increase by up to 43 per cent of the existing capital base.According to S&P's financial services director De Lange, if the four major Australian banks wanted to lift the level 1 capital ratios of their NZ subsidiaries, as proposed, it would mean a total injection of A$8 billion from them, out of a total increase of NZ$17 billion for the whole sector.This proposal from the RBNZ would therefore lift the New Zealand subsidiaries stand-alone profiles above that of their Australian major bank parents. "But because we standardise the ratings of the New Zealand banks with their Australian parents, it will not have any impact on the issuer credit ratings of those New Zealand banks," De Lange said.He also noted that an increase in capital within the New Zealand entities would push the four largest banks towards their intragroup exposure thresholds. To cope with this, the RBNZ has proposed changes to the risk weighting for these exposures. "That's another area of complexity that will need to be looked at," De Lange said.It's more likely, though, that the agency's ratings on the Australian parents of the four major New Zealand banks will remain unchanged. This is so, even though "the potential implications are "material and complex, and give rise to some cross-border regulatory issues," S&P said.Which leaves the "standout risk" for Australia's banking sector as a "disorderly unwinding" of house prices, ahead of dislocation of global financial markets or a raft of new regulations.However, a real-time survey of participants conducted during the webcast established that 62 per cent of them believed Australian house prices will fall