The Australian Bankers’ Association (ABA) has welcomed APRA’s finding that international comparisons will inform, rather than determine, Australia’s approach to bank capital levels.
ABA chief executive Steven Münchenberg said the industry body supports APRA’s view that Australia’s banks are “well-capitalised”, and backs the regulator’s decision to use the capital ratios of foreign banks in the top quartile as a “sense check” rather than a benchmark.
“While making international comparisons is appropriate, the ABA believes that bank capital levels need to be set in response to actual risk levels experienced by banks in Australia, within the internationally agreed Basel framework,” he said.
“The ABA agrees with APRA that no single definition of ‘unquestionably strong’ should be applied, and rather that international comparisons should be used as an input alone.”
Mr Münchenberg said the ABA is also supportive of the regulator’s position that there is no precise way to undertake international comparisons, and noted that the international benchmarks used by APRA are actually more conservative than those documented in the Financial System Inquiry’s (FSI's) final report.
“As noted by the APRA study, a number of assumptions and adjustments are required to make international comparisons, and different approaches to these assumptions and adjustments will influence the final outcome,” he said.
“The ABA also welcomes APRA’s commitment that any strengthening of bank capital adequacy requirements as a result of the FSI and the Basel Committee on Banking Supervision‘s deliberations occurs in an orderly manner.”