Banks to lift capital adequacy ratios
Australia's major banks will need to increase their capital adequacy ratios by at least 200 basis points to meet a recommendation emanating from the Financial System Inquiry (FSI) that they be "unquestionably strong".
That is the assessment of the Australian Prudential Regulation Authority (APRA) following an international comparison study in which it compared Australia's big banks to a sample of 98 large and internationally-active banks that are included in the Basel Committee of Banking Supervision's most recent Basel III Quantitative Impact Study.
The APEA study concluded that while the major Australian banks were relatively well capitalised, they would need to increase their capital adequacy ratios by at least 200 basis points, relative to their position in June, last year, to be regarded as "unquestionably strong".
However the APRA report makes clear that, at this stage" no decision has been made on the total magnitude of any strengthening of capital requirements nor when that strengthening would need to be completed by".
Indeed the regulator said it was committed to ensuring that any strengthening of Australian Deposit-taking Institution (ADI) capital requirements was done in an orderly manner, "such that Australian ADIs can manage the impact of any changes without undue disruption to their business plans".
"APRA will also need to take account of international initiatives still in the pipeline. While it will be possible to move on some aspects of the FSI's recommendations sooner rather than later, greater clarity on the deliberations of the Basel Committee is unlikely before end-2015," the report said.
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