The Australian Prudential Regulation Authority (APRA) will now require banks to hold higher capital levels against interest-only loans, which entail higher risk, under its new bank capital framework. The changes, to come into force on January 2023, are designed to establish “unquestionably strong” Australian standards that align with the internationally agreed Basel III requirements. The new framework also loosens rules for high-deposit loans as well as small business loans and commercial property lending. As a result, banks will be allowed to hold less capital against these types of loans. The new framework will likely widen pricing differences between different types of loans as banks pay more attention to the deposit of new loans. “Capital is the cornerstone of the banking system’s safety and stability,” APRA Chair Wayne Brynes said. “It protects depositors during periods of stress, ensures banks can access funding, facilitates payments, and helps banks to keep lending to …