How Australia’s Murray Report changes reg-cap

Author: Ashley Lee | Published: 8 Dec 2014

Yesterday Australia’s treasurer released its long-awaited Financial System Inquiry Report. Its recommendations could change how banks manage regulatory capital in Australia.

The long-awaited report - known as the Murray Report after the committee’s chairman – is the first such report in Australia since the 1997 Wallis Inquiry. It was intended to bolster the stability of Australia’s financial system in the interest of consumer protection.

It could have far-reaching effects for banks, from requiring them to hold more capital to determining the future of bail-in-able capital in the jurisdiction. It has also prompted Australian Prudential Regulatory Authority (Apra) to consider Basel III’s leverage ratio – a component of the international regulations that were put on hold until after these regulations were released.

The Federal Treasury has opened a public consultation that will close on March 31 2015, but there is also no doubt that, at some stage, Apra will release...