Tar­gets ‘tough for banks’

New cap­i­tal reg­u­la­tions from APRA a con­cern

Sunshine Coast Daily - - FINANCE -

AUS­TRALIA’S big banks may strug­gle to raise the amount of ex­tra cap­i­tal they re­quire un­der new rules pro­posed by the coun­try’s bank­ing reg­u­la­tor, a se­nior ex­ec­u­tive at West­pac Bank­ing Cor­po­ra­tion has said.

The mooted re­quire­ments, which the coun­try’s four largest lenders said would mean they need to raise be­tween $67 bil­lion and $83 bil­lion over four years are sound in prin­ci­ple but tough to achieve, West­pac trea­surer Curt Zu­ber (pic­tured) told the Aus­tralian

Fi­nan­cial Re­view news­pa­per.

“As we go through cy­cles, it is po­ten­tially prob­lem­atic for the banks to get the vol­umes they need in an eco­nomic way for the sys­tem which al­lows for the bal­ance we want to achieve,” he said.

The com­ments sig­nal the first pub­lic push-back from the banks since the pro­posal – the third such re­quest in as many years – was an­nounced by the Aus­tralian Pru­den­tial Reg­u­la­tory Au­thor­ity in Novem­ber.

It also comes as the sec­tor braces for tougher scru­tiny after a scathing pub­lic in­quiry into the fi­nance in­dus­try un­cov­ered wide­spread bad be­hav­iour and mis­man­age­ment.

“It is a big num­ber ... the mar­ket as it stands to­day is not big enough to cope with that level of is­sues,” said Morn­ingstar bank­ing an­a­lyst David El­lis.

“But as the banks con­tinue to raise tier two bonds, their bal­ance sheets be­come stronger as far as the buy­ers are con­cerned,” he said, adding that over­all it would prob­a­bly in­crease fund­ing costs only mod­estly.

APRA said it wanted the coun­try’s four big­gest lenders to raise their avail­able cap­i­tal by 4 to 5 per­cent­age points by 2023 from the cur­rent 14.5 per cent of to­tal risk-weighted as­sets.

The buf­fer would bring Aus­tralian banks in line with new in­ter­na­tional stan­dards de­vel­oped by the Basel Com­mit­tee on Bank­ing Su­per­vi­sion and adopted by Canada and Euro­pean Union coun­tries, APRA said. Banks could use any form of cap­i­tal to meet the higher re­quire­ments, although APRA an­tic­i­pated the most eco­nom­i­cal way to source it would be tier two sub­or­di­nated debt cap­i­tal.

It is seek­ing feed­back from the lenders un­til Fe­bru­ary 8.

Na­tional Aus­tralia Bank Ltd head of group fund­ing Eva Zileli told the Fi­nan­cial Re­view that would make Aus­tralian banks one of the largest is­suers of tier two debt glob­ally.

Aus­tralia and New Zealand Bank­ing Group Ltd, did not re­spond to re­quests for com­ment yes­ter­day, nor did the Com­mon­wealth Bank.

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