Macquarie Group plans to buy back to 10 per cent of its shares on-market, though this may not take place until well into 2012 at the earliest.The group made the announcement of its intentions at its interim profit announcement on Friday.The buyback is subject to various initiatives around what the managing director, Nicholas Moore, called "capital efficiencies".There are also plans for an issue of hybrid capital to help fund the buyback, though the Australian Prudential Regulation Authority is many months away from finalising rules on the treatment of these securities under the Basel III regime for bank capital.The announcement of the buyback helped shares in Macquarie rally 80 cents, or three per cent, on Friday. At one stage the shares were six per cent higher.Macquarie provided an overview of its capital position on Friday that shows a surplus capital position - in its Macquarie Bank Limited subsidiary - of $3.5 billion under the existing Basel II regime.The group argues that its capital surplus under a "harmonised", or "international", version of the Basel III rules leads to a capital surplus of $3.0 billion.If APRA's more stringent version of the capital rules are applied the surplus is whittled back to $1.3 billion.The group says it has plans to free up $800 million in capital through various "efficiency" steps, some of which involve identifying underperforming business units and selling them or shutting them down. Macquarie says it generated $400 million from similar efforts in the September 2011 quarter alone.A further $900 million in capital will be released - later rather than sooner, however - from the winding down of various "legacy assets", such as the ill-timed entry into the United State home loan market prior to the 2007 credit crunch.These bring the level of surplus capital back up to $3 billion in the version provided by Macquarie on Friday, though this may be generous. The funds provided by any hybrid issue would also count towards estimates of surplus capital.The Macquarie scenario presents its pro-forma September 2011 core tier-one capital ratio, under APRA's version of the Basel III rules, as being 9.9 per cent, and, thus, in line with emerging norms of bank capital ratios of between nine and 10 per cent.Macquarie says it holds further surplus capital in the non-banking entity as well, though it was less specific about how much.