The speed of the collapse of Silicon Valley Bank has caught the attention of banking regulators, as they consider changes to regulations in response to the current round of banking instability. Top of APRA’s list are the possibility of additional liquidity requirements where there is high concentration risk and tightening the standard covering interest rate risk in the banking book (IRRBB). APRA chair John Lonsdale said the regulator may need to look more closely at concentration risk in deposits and adjust requirements where an ADI has a particularly high exposure to a particular industry or demographic. “These types of contemplations are already underway among international regulators. The speed of money moving in the system is something we can’t ignore,” he said. Speaking at the AFR Banking Summit yesterday, Lonsdale said: “With the ubiquity of modern online banking, there’s no need to queue and no need to be constrained by branch opening hours. Entire balances can be instantly transferred elsewhere at the click of a button 24 hours a day.” Lonsdale said sharper movements in interest rates, which contributed to SVB’s collapse, was another trend that regulators are looking at. APRA is the only regulator in the world that requires banks to carry capital to address the risk of rising interest rates as part of their core capital requirements. Lonsdale said: “SVB’s exposure to rising interest rates was one of the main factors behind its collapse. In contrast, as markets moved in response to RBA changes in the official cash rate, Australian banks have had to hold additional capital. “Some banks have expressed displeasure about the application of capital for IRRBB but two weeks ago the IRRBB requirement proved its worth. We are currently in the process of updating our prudential standard in this area and will be sure to consider lessons from the past few weeks.” Aside from the collapse of SVB and Credit Suisse, Lonsdale said APRA is concerned about the threat of cyber attacks. The regulator recently asked banks, insurance companies and superannuation funds to report on how well they have implemented its new cyber risk prudential standard. Lonsdale said: “Our analysis of the first tranche of results from the reviews shows that entities have more work to do and that there is a need to continuously raise the bar on cyber preparedness and resilience.” He said there was a lack of rigour in the nature and frequency of security and control testing, insufficient board oversight of cyber, a failure of review incident response plans regularly and inadequate oversight of service providers. Lonsdale also gave an overview of the latest bank stress test, which involved the country’s 10 largest banks. In the scenario the cash rate went up 400 basis points to 4.5 per cent, GDP fell 4 per cent, unemployment rose to 11 per cent and house prices fell 43 per cent over three years. In a twist, each bank suffered a “major and costly” cyber attack. As a result, bank debt ratings were cut, the dollar was sold off and offshore bank funding markets were closed temporarily. All the