The big four banks will have longer than expected to raise extra capital to absorb potential losses after the prudential regulator amended its proposed framework for minimising the fallout from failed institutions.

The Australian Prudential Regulation Authority on Tuesday said the majors had to lift total capital by three percentage points of risk-weighted assets by 2024, putting away what the regulator estimates will be another $50 billion to minimise the need for taxpayer funds should they collapse.

APRA had flagged a four-to-five percentage-point increase in an initial proposal published in November but amended the timeline following submissions from parties including the Customer Owned Banking Association.

APRA said its long-term target of a four to five percentage-point increase remained unchanged.

“The global financial crisis highlighted examples overseas where taxpayers had to bail out large banks due to a lack of residual financial capacity,” APRA deputy chair John Lonsdale said.

“Boosting loss-absorbing capacity enhances the safety of the financial system by increasing the financial resources that an ADI (authorised deposit-taking institution) holds for the purpose of orderly resolution and the stabilisation of critical functions in the unlikely event that it fails.”

The UK and US governments had to pump cash into struggling lenders during the global financial crisis because the impact of them going under outweighed the cost of shoring them up.

APRA’s move on capital is designed to minimise the need for similar taxpayer-funded support in what the regulator called the “unlikely” event of failure.

ANZ said the updated requirement would require it to increase its total capital by $12 billion, while NAB said $12.1 billion, and Westpac $13 billion.

All three said they would meet the requirements primarily through the issuance of new Tier 2 capital.

Fitch Ratings said the revision would result in $20 billion less capital being raised than under APRA’s initial proposal, and the rules more closely resembled those in most of the Asia-Pacific rather than in North America and Europe.

It noted the rules were not geared towards a “worst-case scenario” and international LAC (loss-absorbing capacity) frameworks had higher minimum requirements.

It also observed that banks may ultimately pass on increased costs to their customers.

“Profitability, which is already under pressure from Australia’s low interest-rate environment, will get no respite from the final LAC rules, as more expensive capital instruments replace senior unsecured issuance,” Fitch said.

“However, banks may seek to mitigate higher funding costs by repricing loans.”