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Bank Capital Adequacy in Australia

Author

Listed:
  • Niamh Sheridan
  • Mr. B. Jang

Abstract

The paper finds that, given Australia's conservative approach in implementing the Basel II framework, Australian banks' headline capital ratios underestimate their capital strengths. Given their high capital quality and the progress in their funding profiles since the global financial crisis, the Australian banks are making good progress toward meeting the Basel III requirements, including the new liquidity standards. Stress tests calibrated on the Irish crisis experience show that the banks could withstand sizable shocks to their exposure to residential mortgages. However, combining residential mortgage shocks with corporate losses expected at the peak of the global financial crisis would put more pressure on Australian banks' capital. Therefore, it would be useful to consider the merits of higher capital requirements for systemically important domestic banks.

Suggested Citation

  • Niamh Sheridan & Mr. B. Jang, 2012. "Bank Capital Adequacy in Australia," IMF Working Papers 2012/025, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2012/025
    as

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    File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=25667
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    References listed on IDEAS

    as
    1. Pierluigi Bologna, 2010. "Australian Banking System Resilience: What Should Be Expected Looking Forward? An International Perspective," IMF Working Papers 2010/228, International Monetary Fund.
    2. International Monetary Fund, 2010. "Australia: Basel II Implementation Assessment," IMF Staff Country Reports 2010/107, International Monetary Fund.
    3. Elöd Takáts & Ms. Patrizia Tumbarello, 2009. "Australian Bank and Corporate Sector Vulnerabilities: An International Perspective," IMF Working Papers 2009/223, International Monetary Fund.
    4. International Monetary Fund, 2010. "Canada: Selected Issues Paper," IMF Staff Country Reports 2010/378, International Monetary Fund.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. J. Alejandro Fernández Fernández, 2019. "The Banking System in Australia and New Zealand: A Vision together," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 9(2), pages 1-1.
    2. Muijsson, Cherry & Satchell, Stephen, 2020. "The role of bank funding in systematic risk transmission," Finance Research Letters, Elsevier, vol. 33(C).
    3. Mr. B. Jang & Mr. Masahiko Kataoka, 2013. "New Zealand Banks’ Vulnerabilities and Capital Adequacy," IMF Working Papers 2013/007, International Monetary Fund.

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