{ "title": "Bank Capital Adequacy in Australia", "publication": "IMF Working Papers, January 1, 2012", "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2016/12/31/bank-capital-adequacy-in-australia-25667", "canonical": "https://www.imf.org/en/publications/wp/issues/2016/12/31/bank-capital-adequacy-in-australia-25667", "overlayPath": "/en/publications/wp/issues/2016/12/31/bank-capital-adequacy-in-australia-25667/index.md", "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.", "sections": [ { "heading": "Executive findings", "content": "- Given Australia's conservative approach in implementing the Basel II framework, Australian banks' headline capital ratios underestimate their capital strengths.\n- Australian banks have high capital quality and have made progress in their funding profiles since the global financial crisis.\n- Australian banks are making good progress toward meeting the Basel III requirements, including the new liquidity standards.\n- Stress tests calibrated on the Irish crisis experience show that the banks could withstand sizable shocks to their exposure to residential mortgages.\n- Combining residential mortgage shocks with corporate losses expected at the peak of the global financial crisis would put more pressure on Australian banks' capital.\n- It would be useful to consider the merits of higher capital requirements for systemically important domestic banks." }, { "heading": "Stress-testing scenarios and outcomes", "content": "- Calibration: stress tests calibrated on the Irish crisis experience.\n- Scenario A: sizable shocks to exposure to residential mortgages — result: banks could withstand these shocks.\n- Scenario B: residential mortgage shocks combined with corporate losses expected at the peak of the global financial crisis — result: greater pressure on banks' capital; potential need for higher capital buffers for systemically important domestic banks." }, { "heading": "Policy implications and recommendations", "content": "- Continue progress toward full implementation of Basel III requirements, including new liquidity standards.\n- Consider the merits of higher capital requirements for systemically important domestic banks to bolster resilience under combined shock scenarios.\n- Monitor funding-profile improvements and maintain high capital quality to support resilience against mortgage and corporate loss scenarios." }, { "heading": "Publication and metadata", "content": "- Title: Bank Capital Adequacy in Australia\n- Authors: Niamh Sheridan, B. Jang\n- Date: January 1, 2012\n- Series: Working Paper No. 2012/025\n- Issue: 025\n- Volume: 2012\n- Pages: 20\n- DOI: https://doi.org/10.5089/9781463932527.001\n- Stock No: WPIEA2012025\n- ISBN: 9781463932527\n- ISSN: 1018-5941\n- Subjects: Banking; Basel II; Capital adequacy requirements; Financial institutions; Financial regulation and supervision; Financial sector policy and analysis; Loans; Residential mortgages; Stress testing\n- Keywords: Australia; Australia and New Zealand; bank; bank capital adequacy; bank concentration; bank Nonperforming loan; Basel II; Basel III; Canada; capital; Capital adequacy requirements; capital ratio; disclosure statement; Global; home country banking sector assets; LGD rate; Loans; loss given default; loss-given-default rate; mortgage; probability of default; requiring bank; Residential mortgages; risk weight; Stress testing; stress tests; Tier 1; WP\n\nIMF Working Paper \"Bank Capital Adequacy in Australia\" by Niamh Sheridan and B. Jang, January 1, 2012.\n\n---\n\n Content in this bundle\n\n- wp1225\n - wp1225 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n - wp1225 (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2016/12/31/bank-capital-adequacy-in-australia-25667" } ], "bullets": [ "[Markdown version](/en/publications/wp/issues/2016/12/31/bank-capital-adequacy-in-australia-25667/index.md)", "[Structured JSON version](/en/publications/wp/issues/2016/12/31/bank-capital-adequacy-in-australia-25667/index.json)", "[Bundle manifest](/en/publications/wp/issues/2016/12/31/bank-capital-adequacy-in-australia-25667/bundle-manifest.json)", "Authors: Niamh Sheridan, B. Jang", "Published: January 1, 2012", "Series: IMF Working Papers", "DOI: https://doi.org/10.5089/9781463932527.001", "Given Australia's conservative approach in implementing the Basel II framework, Australian banks' headline capital ratios underestimate their capital strengths.", "Australian banks have high capital quality and have made progress in their funding profiles since the global financial crisis.", "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.", "Combining residential mortgage shocks with corporate losses expected at the peak of the global financial crisis would put more pressure on Australian banks' capital.", "It would be useful to consider the merits of higher capital requirements for systemically important domestic banks.", "Calibration: stress tests calibrated on the Irish crisis experience.", "Scenario A: sizable shocks to exposure to residential mortgages — result: banks could withstand these shocks.", "Scenario B: residential mortgage shocks combined with corporate losses expected at the peak of the global financial crisis — result: greater pressure on banks' capital; potential need for higher capital buffers for systemically important domestic banks.", "Continue progress toward full implementation of Basel III requirements, including new liquidity standards.", "Consider the merits of higher capital requirements for systemically important domestic banks to bolster resilience under combined shock scenarios.", "Monitor funding-profile improvements and maintain high capital quality to support resilience against mortgage and corporate loss scenarios.", "Title: Bank Capital Adequacy in Australia", "Authors: Niamh Sheridan, B. Jang", "Date: January 1, 2012", "Series: Working Paper No. 2012/025", "Issue: 025", "Volume: 2012", "Pages: 20", "DOI: https://doi.org/10.5089/9781463932527.001", "Stock No: WPIEA2012025", "ISBN: 9781463932527", "ISSN: 1018-5941", "Subjects: Banking; Basel II; Capital adequacy requirements; Financial institutions; Financial regulation and supervision; Financial sector policy and analysis; Loans; Residential mortgages; Stress testing", "Keywords: Australia; Australia and New Zealand; bank; bank capital adequacy; bank concentration; bank Nonperforming loan; Basel II; Basel III; Canada; capital; Capital adequacy requirements; capital ratio; disclosure statement; Global; home country banking sector assets; LGD rate; Loans; loss given default; loss-given-default rate; mortgage; probability of default; requiring bank; Residential mortgages; risk weight; Stress testing; stress tests; Tier 1; WP", "**_wp1225**" ], "related": [ { "title": "_wp1225", "role": "document", "sourceUrl": "https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2012/_wp1225.pdf", "summary": { "path": "/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2012/_wp1225.pdf.md", "mime": "text/markdown" }, "binary": { "path": "/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2012/_wp1225.pdf", "mime": "application/pdf" } } ], "alternates": { "markdown": "/en/publications/wp/issues/2016/12/31/bank-capital-adequacy-in-australia-25667/index.md", "json": "/en/publications/wp/issues/2016/12/31/bank-capital-adequacy-in-australia-25667/index.json", "bundleManifest": "/en/publications/wp/issues/2016/12/31/bank-capital-adequacy-in-australia-25667/bundle-manifest.json" }, "generatedAtUtc": "2026-09-17T09:40:34.450Z" }