David Murray Thinks Bank Capital Rules Are Too Tough On Asia

David Murray / IMF

The AFR reports today that Financial System Inquiry chief David Murray tends to agree with comments from the ANZ’s deputy CEO Graham Hodges that the Basel III Capital requirements being instituted as a result of the GFC might be hurting Australia’s major banks.

The Basel III system has been criticised in Asia as representing problems for financing of small and medium enterprises, of trade finance and infrastructure,” Mr Murray told Financial Review Sunday.

“There’s some unintended consequences we need to look at, and in Asia it may well be wise to study that more closely.”

The Basel Committee on Banking Supervision would likely argue that in the wake of the GFC, banks are being forced to hold more regulatory capital so that there is more money (capital) available to support claims in the event that a bank or other financial system player needs to be wound up or rescued.

The question Murray’s FSI is tasked with, though, is balancing competition and innovation with financial system stability and with submissions due today, the inquiry is likely to receive much advice.

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