The International Monetary Fund yesterday called on Australian financial regulators to adopt higher capital ratios for major banks.In its annual "statement" released yesterday, on its periodic dialogue with Australian officials, the IMF wrote that it would "encourage the authorities to consider higher capital requirements on banks that are systemically important in the domestic market, taking into account the currently evolving international standards."The IMF wasn't any more specific than this and only indirectly provided a rationale for its advice.Among "challenges" facing banks in Australia, the IMF wrote, are worries that "banks may be tempted to take on riskier strategies" at a time of lower credit growth.The "sizeable short-term external borrowing" of Australian banks also "still remains a risk", the IMF said. The IMF also called on banks to further reduce their reliance on this form of borrowing.The Reserve Bank of Australia puts the short-term wholesale liabilities of banks at around one-fifth of banks' funding, a little less than that of the long-term offshore funding sources of the banks.The Australian Prudential Regulation Authority, along with bank regulators in many countries, is weighing up the appropriate level of capital for the largest banks in line with the recommendations made by the Financial Stability Board.At issue is the level of any capital surcharge along the lines proposed by the FSB for the approximately 30 global banks concerned, as well as a slightly lower surcharge that may be proposed for large domestic banks.An alternative approach being promoted by local banks is to embrace "living wills" as an alternative to the capital surcharge pushed the Financial Stability Board.