POWERED BY MOMENTUM MEDIA
Banks need tougher capital adequacy
Banks must be prepared to accept tougher capital adequacy rules and revised accounting standards if a genuine commitment to avoid a repeat of the global financial crisis is to be made, according to the chair of the International Actuarial Association Enterprise and Financial Risks Committee, Tony Coleman.
Coleman has told an Institute of Actuaries of Australia conference in Sydney today that it had been widely recognised that an over-reliance on monetary policy and an inability to manage asset price bubbles were key drivers of the collapse.
He said pro-cyclical capital requirements had then worsened the crisis by leaving banks disastrously short of capital when they needed it most.
In a bid to address the problems, Coleman pointed to two options — formula based and discretionary.
Coleman said formula-based capital management drew down on insurance industry practices where companies were required to store capital in good times to create buffers when markets turned sour — something that could be implemented by the Australian Prudential Regulation Authority (APRA) with government approval.
He said, alternatively, discretionary capital management could be implemented by an independent reserve bank setting capital adequacy parameters.
Coleman said expanding the use of the actuarial control cycle approach was also recommended to improve risk management.
AUTHOR
Mike Taylor
Recommended for you
Superannuation funds have posted another year of strong returns, but this time, the gains weren’t powered solely by Silicon Valley.
Australia’s $4.1 trillion superannuation system is doing more than funding retirements – it’s quietly fuelling the nation’s productivity, lifting GDP, and adding thousands to workers’ pay packets, according to new analysis from the Association of Superannuation Funds of Australia (ASFA).
Large superannuation accounts may need to find funds outside their accounts or take the extreme step of selling non-liquid assets under the proposed $3 million super tax legislation, according to new analysis from ANU.
Economists have been left scrambling to recalibrate after the Reserve Bank wrong-footed markets on Tuesday, holding the cash rate steady despite widespread expectations of a cut.
TOP PERFORMING FUNDS
ACS FIXED INT - AUSTRALIA/GLOBAL BOND
Fund name
3y(%)pa
1
DomaCom 465 Calder Road Calder
99.46 3 y p.a(%)
2
DomaCom DFS Mortgage
95.46 3 y p.a(%)
3
Global X 21Shares Bitcoin ETF
78.55 3 y p.a(%)
4
BetaShares Crypto Innovators ETF
50.39 3 y p.a(%)
5
Global X GlobalX FANG+ ETF
47.50 3 y p.a(%)
