Australia and New Zealand Banking Group is raising extra capital from institutional and retail shareholders to fall into line with tougher regulatory requirements.

The bank has announced a fully underwritten institutional share placement to raise A$2.5 billion ($1.83 billion), followed by an offer to ANZ’s eligible shareholders to buy a share purchase plan to raise around A$500 million. The share purchase plan is not being underwritten, according to ANZ.

The capital-raising will enable the bank to meet added requirements (recently announced by the Australian Prudential Regulation Authority) more quickly and efficiently. Average credit risk weights for major bank Australian mortgage portfolios is increasing to 25%, with an effective date of 1 July 2016.

The institutional share placement has been fully underwritten by Citigroup Global Markets Australia, Deutsche Bank and JP Morgan. Trading in ANZ’s shares was halted briefly.

Shayne Elliott, the bank’s chief financial officer, said: “Given current market conditions, APRA’s compressed implementation timetable for the mortgage risk weight changes and the amount of capital to be raised, we believe a placement on these terms provides more certainty for shareholders than other methods available such as consecutive underwritten dividend reinvestment plans.

“This capital-raising will supplement our organic capital generation since June 2015 and allow ANZ to achieve a common equity tier one capital ratio above 9% following the introduction of APRA’s revised risk weightings next year. We expect that this will position our CET1 capital ratio in the top quartile of international banks on an internationally harmonised basis.”

(The CET1 capital ratio is a key measure of a bank’s financial strength; it measures the amount of core bank capital against its total of risk-weighted assets.)

Before issuing its trading statement on 18 August, ANZ said that for the nine-month period to 30 June 2015, its cash profit was A$5.4 billion, an increase of 4.3% on the same period in 2014.