The Australian Prudential Regulatory Authority will not be bound by the Financial System Inquiry's recommendation that in setting capital ratios for banks it establish a baseline target in the top quartile of internationally active banks.APRA chairman Wayne Byres said that he did not think international comparisons should be the ultimate benchmark for measuring "unquestionably strong" bank capital standards."We are reluctant to tie ourselves mechanically to a moving target based on an international peer group ranking," Byres said in a speech to the RMA Chief Risk Officer forum in Sydney this week.Byres said APRA should have the final say on the calibration of Australian capital standards, not have it determined by changes in the ratios of foreign banks.Further, he said precise comparisons were difficult - a point APRA has made before. There is no single internationally harmonised capital ratio that can be used as a benchmark (the Basel framework is a set of minimum standards)."The top quartile positioning is just one means of looking at the issue," Byres said.When APRA released the results of an international capital comparison in July, it said the capital ratios of the major banks might be 300 basis points higher on average on an "apples for apples" comparison. To reach the bottom of the top quartile of internationally active banks, the majors would need to increase their ratios by around 70 bps.Later the same month APRA announced that it would increase the amount of capital required for Australian residential mortgage exposures by banks accredited to use the internal ratings-based approach to credit risk.Byres said this would be equivalent to increasing minimum capital requirements for the major banks by about 80 bps."It is quite fortuitous. By moving quickly on the FSI [mortgage risk weight] recommendation, once the current round of capital raisings are completed the common equity tier one gap that was identified is likely to have been closed," Byres said."That is important because it gives APRA time to assess what further steps we might want to take, and when, to settle on a final standard of 'unquestionably strong'."Byres reiterated that over the medium to long term the major banks would still need to increase their capital ratios by at least 200 bps relative to their position in June 2014.