THE big four may not be among banks with the potential to put global markets at risk, but they may still have to report like one anyway.
Amid heightened debate to tackle “too big to fail” banks, the local regulator today said the big four banks should report “indicators” used to identify so-called “global systemically-important banks” (G-SIBS).
In 2011, 29 banks were deemed systemically important globally, including Bank of America, Deutsche Bank, JP Morgan and Mizuho.
While escaping being deemed a G-SIB, the Australian Prudential Regulation Authority in December however said ANZ, Commonwealth Bank, Westpac and National Australia Bank were all systemically important to the domestic economy, known as D-SIBs.
Under this regime, the big four will have to hold an extra one percentage point of common equity tier-one capital by 2016.
But because the Financial Stability Board updates its list of G-SIBs each year, large banks are urged to disclose information so investors can mull the chances of them being added.
“Even though they are not currently identified as G-SIBs, APRA proposes that the four major Australian (banks) — CBA, ANZ, NAB and Westpac — disclose the 12 indicators used in the G-SIB identification methodology,” APRA said.
Banks have until October 31 to respond to the discussion paper.
It comes after APRA new chair Wayne Byres this week called on the G20 to persevere with rules designed to ensure no bank is too big to fail so taxpayers don’t wear the cost.
“Too-big-to-fail has been a longstanding problem, and solving it would undoubtedly be a positive outcome,” Mr Byrnes said.
Measures that reduce implicit subsidies and price risk correctly should substantially improve the efficiency and competitiveness of the financial system,” he said.
Tackling the too-big-to-fail banks is a priority for the G20 in Brisbane later this year, including whether major banks should hold an additional layer of “loss-absorbing capacity” that can be bailed in, on top of higher regulatory capital.
But Mr Byres also pointed to the difficulties of “bailing in” certain creditors like senior bond holders, saying while more loss absorbency was “conceptually appealing”, it was “difficult to put into practice”, given added costs and a risk of runs on other banks.Author: Michael Bennet
Source: The Australian