The Australian Bankers Association will continue to work on development of harmonised capital ratios, a topic of some controversy, if analysis produced by contributors to Banking Day is on the mark.Steven Munchenberg, executive director of the Australian Bankers Association wrote on Friday that "we believe the interim [Financial System Inquiry] report's suggestion that Australian banks only sit in the middle of the pack in international terms is not correct.""We are working with the banks on a more detailed analysis to put to the inquiry. "In terms of international comparability, the banking industry would support the development of internationally harmonised capital ratios, to aid transparency and comparability of capital ratios across jurisdictions."Recent representations on harmonised capital by banks are problematic. In its June 2014 quarterly trading update ANZ put its core equity tier one capital ratio at 8.3 per cent. ANZ said this "harmonised" to 10.3 per cent.Analysis by John Watson from Margate Financial, in conjunction with Morgij Analytics, has found "the majors portray capital harmonisation as a straightforward calculation process that assumes other jurisdictions only require minimum standards and makes no allowances for IRB model variations, differences in definition of capital, allowable deductions, and so on. "The Big Four ignore the recent introduction of quantitative restrictions on residential lending in other jurisdictions," Watson wrote last week."The majors also ignore their sectoral credit risks that result from their over-concentration on lending secured by residential property and their inclusion of higher risk income-producing investment properties in their definitions of residential lending, contrary to Basel III requirements that serve to artificially lower internally generated risk weighted assets."Munchenberg said that APRA and Australian banks "are currently working on a project to develop a harmonised capital ratios template that could be used by Australian banks. "This would help improve the comparability and transparency of the capital ratios of Australian banks to the Basel standard," he said.