Bank Capital Adequacy in Australia

 
Author/Editor: Jang, B. ; Sheridan, Niamh
 
Publication Date: January 01, 2012
 
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate
 
Summary: 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.
 
Series: Working Paper No. 12/25
Subject(s): Bank supervision | Banking sector | Capital | Australia

Author's Keyword(s): Australia | Canada | Basel II | Basel III | capital | loss given default | probability of default | stress tests
 
English
Publication Date: January 01, 2012
Format: Paper
Stock No: WPIEA2012025 Pages: 19
Price:
US$18.00 (Academic Rate:
US$18.00 )
 
 
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