Westpac queasy on capital target

Lindsay Maxsted, chair of Westpac, on Friday voiced unease over the tenor of key recommendations of the Financial System Inquiry.

Speaking at the bank's annual general meeting in Brisbane, Maxsted said: "we believe the sector is already strong on many dimensions."

David Murray's panel used the phrase "unquestionably strong" as a goal for the sector and defined this as capital ratios for Australian banks "ranked in the top 25 per cent of global banks."

Maxsted flagged a willingness to engage in the debate, albeit with a tone of resistance.

"We need to work though the details with [the Australian Prudential Regulation Authority] on how best to assess capital, what the appropriate international benchmarks should be, and the form that capital should take," he told the AGM.

Maxsted said the debate "has typically equated strength with capital, with less commentary on the broader elements of strength such as the quality of systems and processes and the culture of the organisation."

Some analysts are assuming the FSI's plans will come into effect.

Moody's Investors Service said on Friday that capital levels in the Australian banking sector could move higher over the medium term as a result of recommendations made by the Financial Sector Inquiry, or if APRA introduced a countercyclical buffer that provided a positive credit offset.