Australasian banks need to separate their main businesses either side of the Tasman into subsidiaries of a non-operating holding company, an academic group proposes.The Australia-New Zealand Shadow Financial Regulatory Committee proposed the policy initiative in a commentary on regulatory initiatives for the banking sector on Friday.The committee, which comprises interested academics in the fields of banking, said New Zealand, which has a distinctive resolution scheme for banks, "has probably gone about as far with this as is realistically possible. "Australia, on the other hand, might want to protect itself by insulating the parent banks from potential problems in their New Zealand banks."The committee acknowledged that "it is not realistic to think that the two operations will be immune to very serious repercussions in the event of failure in one or other country. It argued, though, that separation of subsidiaries (rather than having the New Zealand arm as a subsidiary of the group which is the trading arm of the bank in Australia) would reduce direct financial spill-over effects sufficiently.The Shadow Financial Regulatory Committee also called for the use of contingent capital (such as preference shares that convert into capital during times of distress) to buttress other capital measures. The latter include additional capital buffers fromThe committee also called for use of a simple leverage ratio as an alternative to the ever more convoluted risk-weighted measures that are the cornerstone of the present capital ratio. The committee proposed that this be set at "a significant increase" over the three per cent ratio that will be used in many banking markets.