Australia's Major Banks Say The Murray Enquiry Used The Wrong Numbers To Calculate Capital

David Murray / IMF

Australia’s Major banks are strong by international comparison but the Murray Inquiry in its interim report concluded that Australia’s Majors only hold levels of capital that would put them in the “middle” range compared to international institutions.

It was an assertion that was always going to draw fire from the majors who at every chance and each half yearly earnings report present data which adjusts their capital ratios up for international comparison – implying if they were in another, non-APRA, jurisdiction the capital they hold would be calculated more favourably.

The AFR reports this morning that as the deadline for the second round of submissions on August 26 draws near the Australian Bankers Association CEO Steven Munchenberg said the banks are “concerned that if some of the statements in the interim report – that Australia’s capital is middle of the road, that housing is a ­systemic risk – are allowed to remain unchallenged and are then taken out of context that is going to cause us a lot of future grief”.

Munchenberg says the Inquiry hasn’t calculated the capital ratios correctly.

“The approach was simplified and didn’t take into account the complexities and nuances of how capital is determined in Australia, including deductions required by APRA and some of the areas where APRA has adopted a more conservative approach, and as a result underestimated the amount of capital in Australia relative to overseas”, he told the AFR.

Murray is due to report to Treasurer Hockey in November.

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