Cover IMF Working Papers
Bank Capital Adequacy in Australia
Author: Niamh Sheridan and Mr. B. Jang
Series:
IMF Working Papers
Volume/Issue:
Volume 2012: Issue 025
Language:
English
Publication Date:
01 Jan 2012
DOI:
https://doi.org/10.5089/9781463932527.001
ISBN:
9781463932527
ISSN:
1018-5941
Pages:
20
Keywords:
WP; bank; capital ratio; disclosure statement; mortgage; Tier 1; Australia; Canada; Basel II; Basel III; capital; loss given default; probability of default; stress tests; risk weight; requiring bank; LGD rate; bank concentration; loss-given-default rate; bank Nonperforming loan; home country banking sector assets; bank capital adequacy; Residential mortgages; Capital adequacy requirements; Stress testing; Loans; Australia and New Zealand; Global
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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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.
Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund