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Basel and Changing Banking Practice

Australian Prudential Regulation Authority (APRA) Chairman Wayne Byres said recently that policy means little if it does not impact behaviours at the Basel Committee on Banking Supervision (BCBS) meeting.

“We don’t just want banks to have stronger capital and liquidity ratios. We also want them to have stronger capital and liquidity management, founded on strong risk culture,” Byres said.

Byres to spoke to the Royal Commission into Misconduct in the Banking, Superannuation and the Financial sector.

Earlier this week the regulator also announced their commitment meeting some of the recommendations made by the royal commission.

Byres said that the making reform proposals into better banking practice had four components:

• global reforms must be agreed as international standards;

• agreed international standards then need to be translated into domestic regulation;

• bank policies, systems, and frameworks then must be modified to comply with new regulations; and

• actual banking behaviours and practices need to adjust to a new set of constraints on the way business is done.

“While the core Basel III risk-based capital requirements and the LCR are largely in force around the world, there has been less progress in some other areas: many requirements are subject to lengthy transitional periods, implementation of the NSFR has been disappointingly slow in several jurisdictions, and margining and disclosure requirements can be described as a little patchy.”

In the Australian context, the APRA chairman said that while Australian financial institutions have escaped the worst of the of the global financial crisis (GFC) did not mean complacency on the part of the prudential regulator.

“Effective supervision is absolutely crucial to making sure the regulatory regime achieves its purpose.”

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