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Bank Capital Adequacy in Australia

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  • Niamh Sheridan
  • B. Jang
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    Abstract

    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.

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    Bibliographic Info

    Paper provided by International Monetary Fund in its series IMF Working Papers with number 12/25.

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    Length: 20
    Date of creation: 01 Jan 2012
    Date of revision:
    Handle: RePEc:imf:imfwpa:12/25

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    Related research

    Keywords: Capital; Bank supervision; Banking sector; mortgages; residential mortgages; banking; mortgage; residential mortgage; banking system; mortgage lending; tier 1 capital; capital adequacy; prudential regulation; banking sector assets; probability of default; capital requirement; commercial property; banking supervision; bank capital; mortgage insurance; bankers ? association; bankers; housing loans; housing loan; banks ? balance sheet; risk mortgages; return on equity; housing finance system; mortgage market; banking authority; bank of spain; net interest margin; banks ? loans; return on assets; capital adequacy ratio; foreign exchange; bank exposures; housing finance; fixed rate mortgage; bank regulation; banking concentration; bank funding;

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    1. Pierluigi Bologna, 2010. "Australian Banking System Resilience," IMF Working Papers 10/228, International Monetary Fund.
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