Murray Inquiry creates ‘confusion’ for CBA

The head of Australia’s biggest bank says findings from the Murray Inquiry interim report confuse overseas funders over the capital strength of Australian banks.

Addressing a press conference in Sydney on Wednesday to elaborate on the CBA’s annual profit results, chief executive Ian Narev fielded questions about the possible changes to capital requirements flagged in the FSI findings.

“The debate here isn’t really whose numbers are right and whose numbers are wrong, the question in our mind is it is an example of the confusion that can be caused when we are talking to overseas investors in places like the US, Asia and Europe when they are comparing the capital strength of banks as they do when they are deciding who they want to give funding to,” Mr Narev said.

“It is absolutely critical that out of this inquiry we agree on a way to represent the capital strength of Australia’s banks directly and fairly but also in a way that shows them in the best light possible, because that is good for the overall strength of the economy,” he said.

Mr Narev’s comments come after the Australian Bankers’ Association voiced its concerns this week about a statement in the interim report that the capital of Australian banks is “middle of the road”.

CBA reported a tier-one ratio of 9.3 per cent in its full year results, well above its eight per cent target for 2016.

On an internationally harmonised basis, the bank reported a capital position of 12.1 per cent, making it fourth most capitalised bank in the world.

Asked whether the FSI had used the correct numbers in its calculations, CBA chief financial officer David Craig said the interim report quoted a Basel Committee report, but that the Basel report “was not looking at like for like” capital levels.

“There is an industry study going on at the moment that will hopefully clarify that and some information should be available in the next few weeks to enable a proper fact based debate to be had,” Mr Craig said.

 

 

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