Held-to-maturity (HTM) investments have re-emerged as a talking point in Australia’s financial landscape for 2025, as APRA and global regulators sharpen their focus on bank balance sheet resilience. But what exactly are HTM assets, and why do they matter for both individual investors and institutions this year?
Understanding Held-to-Maturity (HTM) Securities
HTM securities are debt investments—like government or corporate bonds—that an investor commits to holding until they mature, regardless of daily market price swings. Unlike available-for-sale (AFS) or trading securities, which are measured at fair value, HTM assets are accounted for at amortised cost. This means their value on financial statements doesn’t fluctuate with market prices, providing a stable snapshot of a portfolio’s core holdings.
- Common HTM assets: Australian government bonds, investment-grade corporate bonds, semi-government securities
- Who uses HTM? Major banks, credit unions, insurance firms, and some sophisticated retail investors
HTM classification is attractive for risk management and regulatory capital reasons, but comes with strict accounting rules. Once a security is classified as HTM, selling it before maturity (except under specific, limited circumstances) can force a reclassification of the entire HTM portfolio, triggering mark-to-market losses and regulatory scrutiny.
2025: Regulatory Shifts and Their Impact
This year, the Australian Prudential Regulation Authority (APRA) has tightened its oversight of HTM portfolios, in line with global trends following the 2023 US regional banking crisis. The collapse of Silicon Valley Bank in 2023 highlighted how unrealised losses in HTM portfolios can undermine confidence—even when those losses aren’t recognised on the balance sheet.
Key regulatory developments in 2025 include:
- Enhanced Disclosure: APRA now requires more granular reporting of unrealised HTM losses in annual financial statements, aiming to boost transparency for investors and depositors.
- Liquidity Stress Testing: Banks must demonstrate their ability to meet sudden withdrawal demands without being forced to liquidate HTM assets at a loss.
- Capital Adequacy Adjustments: New guidelines ensure that even unrecognised losses in HTM books are factored into banks’ capital stress scenarios.
For investors, this means greater visibility into how banks manage interest rate risk and the real economic value of their debt holdings. For banks, it’s a push to balance yield-seeking behaviour with the need for liquidity and capital flexibility.
Should Individual Investors Care About HTM?
While most retail investors don’t directly use HTM accounting, understanding how the big players manage these portfolios is key for assessing bank stability and the broader risk environment. Here’s why it matters in 2025:
- Interest Rate Risk: With the RBA expected to hold rates steady or cut slightly this year, the market value of older, low-yield bonds may remain below face value. For banks, that’s a paper loss—but for everyday savers, it’s a sign to scrutinise the financial health of their institution.
- Term Deposit Rates: Banks with large, locked-in HTM portfolios may be less flexible in offering competitive term deposit rates if rates fall or volatility spikes.
- Shareholder Impact: Investors in bank stocks should watch for disclosures of unrealised losses in HTM books, as these can impact dividend policies and capital raisings.
For sophisticated investors holding their own bond portfolios, the HTM approach—buying and holding until maturity—remains a time-tested way to avoid short-term volatility. However, flexibility is limited: if you need to sell before maturity, you could crystallise losses if market rates have risen.
Real-World Example: Australian Bank Balance Sheets in 2025
Major Australian banks like CBA and Westpac have reported increased transparency around HTM portfolios this year, following APRA’s new rules. For example, CBA’s 2025 half-year report shows a stable HTM book with minimal forced sales, reflecting conservative risk management. Meanwhile, smaller lenders are treading carefully, wary of the pitfalls seen overseas when HTM losses go unrecognised for too long.
For investors, keeping an eye on these disclosures is now part of due diligence—especially if you’re holding bank shares or large term deposits.
Conclusion: HTM’s Growing Importance in a Changing Market
Held-to-maturity assets have always been about predictability and long-term planning. In 2025, with regulatory scrutiny rising and market volatility persisting, understanding HTM is essential for anyone tracking the health of Australia’s banks and the safety of their own investments.
