The regulator’s International capital comparison study found that while the majors are “well-capitalised”, they would need to do more to place in the top quartile of their international peers.
Major banks would require an increase of “around 70 basis points” in Common Equity Tier One (CET1) capital and “at least 200 basis points in total capital” – relative to their position in June 2014 – to be comfortably positioned in the fourth quartile over the medium to long term, according to APRA.
ANZ chief financial officer Shayne Elliott said the bank has been planning for an increase in capital levels for some time following the changes to the Basel international capital framework and the recent Financial System Inquiry.
“In this regard, our CET1 position has been further strengthened from the 8.3 per cent reported as at June 2014,” he said.
Mr Elliott said APRA’s recommendation for the big four to increase its CET1 capital is within the range that ANZ has been planning for.
“As we have said previously, we have a number of options for managing our capital, including organic capital generation, balance sheet management and the disposal of non-core assets,” he said.
“ANZ will continue to work with APRA on the detail of these changes and our capital management plans.”
NAB said a strong balance sheet has always been a priority for the bank, and since June 2014, it has increased its CET1 ratio from 8.46 per cent to approximately 10 per cent following the completion of its $5.5 billion rights issue in May and “taking into account the finalisation of other near-term major initiatives”.
“Total capital ratios have increased by a larger margin over this same time period. This increase represents a CET1 capital buffer of approximately 100 basis points to the midpoint of NAB’s 8.75 per cent to 9.25 per cent CET1 target operating range,” the bank said.
“As a result, NAB is well placed to respond to changes in regulatory capital requirements.”
Westpac chief financial officer Peter King said the major was pleased with APRA’s confirmation that Australian banks are well capitalised, and that the top quartile positioning is a useful ‘sense check’ rather than a regulatory benchmark.
“The release of the study is a further step in helping investors understand the relative position of the Australian bank capital ratios compared to international peers," he said.
CBA was contacted by Mortgage Business for comment, but declined.