Au­thor­ity shies away from ty­ing lenders to over­seas firms

Big banks off hook

Townsville Bulletin - - NEWS - EVAN SCHWARTEN

AUS­TRALIAN banks will need to raise bil­lions of dol­lars in new cap­i­tal in the next few years, but an­a­lysts say the big four lenders have scored a win with the bank­ing reg­u­la­tor.

The Aus­tralian Pru­den­tial Reg­u­la­tory Au­thor­ity says the ma­jor banks are well cap­i­talised and has stepped away from a rec­om­men­da­tion from the Fi­nan­cial Sys­tem In­quiry to tie cap­i­tal re­serve lev­els to their global peers.

The in­quiry, led by for­mer Com­mon­wealth Bank boss David Mur­ray, in De­cem­ber rec­om­mended banks’ cap­i­tal lev­els be lifted to a level that would place them in the top 25 per cent of global peers, to en­sure the lenders were “un­ques­tion­ably strong”.

But APRA says while the global com­par­i­son is use­ful, it won’t strictly tie Aus­tralian banks to in­ter­na­tional peers.

“APRA re­gards the top quar­tile po­si­tion­ing as a use­ful ‘ sense check’ of the strength of the Aus­tralian frame­work, but does not in­tend to tightly tie Aus­tralian re­quire­ments to a bench­mark based on the cap­i­tal ad­e­quacy ra­tios of in­ter­na­tional banks,” APRA said.

Morn­ingstar se­nior an­a­lyst David El­lis says that’s good news for the big four – the Com­mon­wealth, Na­tional Aus­tralia Bank, ANZ and West­pac.

APRA is still ex­pected to lift cap­i­tal re­quire­ments, but their latest state­ment in­di­cates the mea­sures it im­ple­ments won’t be as oner­ous as some had ex- pected and the banks will have sev­eral years to get their house in or­der, he said. “It’s a big win for the ma­jor banks,” he said.

APRA said the ma­jor banks would need to lift their cap­i­tal re­serves by around two per­cent­age points com­pared to their June 2014 lev­els in or­der to be placed in the top quar­tile glob­ally, a move Mr El­lis says would re­quire the banks to raise be­tween $ 15- 20 bil­lion.

But NAB and West­pac have al­ready an­nounced big cap­i­tal rais­ings – worth $ 5.5 bil­lion and $ 2 bil­lion re­spec­tively and Mr El­lis said the banks could easily raise funds by is­su­ing new shares or selling as­sets.

“The banks will be able to com­fort­ably achieve that over a num­ber of years,” he said.

NAB said it was well placed to re­spond to changes to re­serve ra­tios, while West­pac said it was pleased APRA wouldn’t re­quire banks to bench­mark their re­serves against in­ter­na­tional peers.

ANZ said it had been plan­ning for higher cap­i­tal re­quire­ments for some time. “We have a num­ber of op­tions for man­ag­ing our cap­i­tal in­clud­ing or­ganic cap­i­tal gen­er­a­tion, bal­ance sheet man­age­ment and the dis­posal of non- core as­sets,” chief fi­nan­cial of­fi­cer Shayne El­liott said.

It’s a big win for the ma­jor banks MORN­INGSTAR SE­NIOR ECONOMIST DAVID EL­LIS

Newspapers in English

Newspapers from Australia

© PressReader. All rights reserved.