17Mar/Assessment of Basel III capital regulations in Australia concluded by the Basel Committee

Assessment of Basel III capital regulations in Australia concluded by the Basel Committee

17 March 2014

The Basel Committee on Banking Supervision has today published a report< assessing the regulations that implement the Basel capital framework in Australia. This is the eighth in a series of reports< on Basel Committee members' implementation of Basel III risk-based capital minimum standards. The reports are prepared under the Committee's Regulatory Consistency Assessment Programme (RCAP). The Basel Committee has already published on its website reports on Brazil, China, the European Union, Japan, Singapore, Switzerland and the United States.

To assess the compliance of Australia's domestic capital rules with the international Basel capital standards, the Committee's RCAP assessment team held discussions with senior officials and technical staff of the Australian Prudential Regulation Authority (APRA), senior representatives from selected Australian authorised deposit-taking institutions, two accounting/audit firms and a credit rating agency.

Australia's implementation of the Basel capital framework was found to be closely aligned with the Basel III standards: 12 out of 14 assessed components were found to be "Compliant". The two components that were graded "Largely Compliant" were the "Definition of Capital" and the "Internal Ratings-Based Approach for credit risk", where some differences exist vis-à-vis the Basel framework. The overall framework of Australia's capital regulation was graded "Compliant".

The assessment team noted that some aspects of Australia's capital regulations, such as those related to the definition and measurement of capital, are more rigorous than required under the Basel Framework. APRA has also implemented some aspects of the Basel III Framework ahead of the internationally agreed timeline and has also decided not to opt for the extended transition period for Basel Framework implementation.

The report published today reflects the Committee's continuing efforts to promote adoption of its standards and to monitor its members' full and consistent compliance with the Basel Framework. The RCAP also helps member jurisdictions to identify deviations from the Basel Framework and it weighs the materiality of any deviations.

An assessment of the implementation of the Basel III capital standards in Canada, and follow-up assessments of the final Basel III rules in the EU and the United States are under way.