Bond investors say the prudential regulator’s posturing on capital securities will drive up funding costs and make it harder for the banks to build up their $70 billion “too big to fail” buffers by the 2026 deadline.

Subordinated tier two bonds issued by Australian banks and insurers have endured a week of price falls after the new chairman of the Australian Prudential Regulatory Authority, John Lonsdale, wrote to institutions to outline its position on “uneconomic calls”.