ANZ, Westpac chairs hit IMF on capital

ANZ chair John Morschel and Westpac chair Lindsay Maxsted yesterday attacked the International Monetary Fund's push for the Big Four to hold extra capital.

Morschel told a Financial Review lunch in Melbourne that Australia's capital rules were probably pushing the Big Four "very close to the point where we make ourselves globally uncompetitive", the Financial Review reported.

Global regulators have been pushing for country-level regulators to impose tougher capital requirements on large local banks that are "domestically significant" to their economies. The IMF's latest Financial System Stability Assessment of Australia, released at the weekend, shows the Australian Prudential Regulatory Authority is under pressure to explicitly apply those requirements to the Big Four.

APRA now appears increasingly likely to impose an additional explicit capital charge of perhaps one per cent of assets on the Big Four. The banks, however, have signalled they will fight on the issue.

Morschel was reported as referring to the Big Four's AAA ratings as evidence of substantial capital adequacy.

"If we're going to encourage our local banks to compete overseas in terms of growing the business, we need to not have capital standards which are considerably in excess of those that are adopted overseas.

"It's much like the situation when we introduced the carbon tax. Why did we need to go so far when globally we're way out of the competition?"

At the same lunch, Westpac's Lindsay Maxsted doubted there was a need for further capital requirements.

"I think the IMF to some degree is behind the game," he was reported as saying. "Some of the points they are raising may well have been issues in 2007 and 2008 but they are not issues now."

Some analysts say an additional charge on the Big Four would have little short-term effect. Goldman Sachs equity analyst Ben Koo told Banking Day this week that "the banks appear ready to deal with the possibility of having to carry more capital" and appeared to already be carrying more capital than some major global banks, which face tougher requirements.