At APRA, "we now hear from candidates for IRB status that they are concerned the proposals being developed will not provide them with any capital benefit whatsoever," APRA chief Wayne Byres told a mutual banking conference yesterday.
"When looked at holistically, we think any gap is small" Byres said of a long-simmering dispute over mortgage risk weights for credit unions and mutual banks and the likes of ME.
"Much is made of the headline difference in risk weights between the IRB and standardised approaches," Byres told the Customer Owned Banking Convention on the Gold Coast.
"At first glance, they do indeed look different. But as we pointed out in our most recent discussion paper, the comparison is much more complex than a superficial comparison implies.
"There are differences in capital targets, the treatment of loan commitments, the application of capital for interest rate risk in the balance sheet, and adjustments to expected losses - all of which have the effect of adding to IRB bank capital requirements and mean that the headline gap is greatly narrowed in practice."
Winding up his remarks Byres said:
"Stability is easy to take for granted, but hugely costly once foregone. In a system notable for its relative stability, it can be easily forgotten that there have been around 150 systemic banking crises around the globe in the past 50 years.
"The cost of crises is invariably substantial. Stability will always remain APRA's driving objective: we must stay true to our mandate to deliver a safe and stable financial system for the community.
"We are, however, endeavouring to be more structured and systematic about the way we assess all of the components of our mandate - including competition - and be clearer in acknowledging the trade-offs being made. The paper we have released today is part of that process. And the regulatory changes in the pipeline are designed to make sure that competition occurs from a position of financial strength.
"That said, it is important to recognise that the competitive landscape is shaped by more than regulation. Regardless of perceived regulatory headwinds, the mutual sector has grown strongly and won market share. That is to your great credit.
"The current environment, notwithstanding its challenges, offers you further opportunities. You will, to return to the theme of this event, undoubtedly be stronger together if you work collaboratively to grasp them, and I wish you every success in doing so."