John Laker, chair of the Australian Prudential Regulation Authority, has defended the more onerous regulation of banks since the GFC, insisting it was appropriate that they met minimum capital and liquidity standards.Speaking at a forum hosted by the Institute of International Finance in Sydney yesterday, Laker also projected that the financial system inquiry would not "turn back the clock" on five years of regulatory reform.Laker said: "The impact of seeking to retreat from the status quo on the hard won reputation of the Australian banking system … will I am sure be carefully weighed by the inquiry."He said regulators "take a conservative approach to the measurement of capital and risk weighted assets. We always have. We focus on the loss absorbing quality of capital, not just on the quantum, hence our calculations eliminate double counting and exclude assets that are likely to have little or no value."Laker acknowledged that APRA's approach to measuring bank capital produced lower headline capital ratios than in many other markets.He discounted suggestions banks may have "difficulties in explaining their financial strength" to some investors."At first blush it is hard to reconcile this with the stellar performance of our major banks. They have returns on equity in the mid to high teens, are one of a few listed banks with 'AA' ratings and have moved into the top tier of global bank by market capitalisation," he said."Clearly, astute investors know a good bank when they see one."The Financial Review reported on Laker's remarks at the forum.