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Trends in Australian Bank Capital LETTER OF TRANSMITTAL This report?s topic is Trends in Australian Bank Capital. The content is as following: 1. The explanation
(Carew, E. 1996). Over the next 25 years, sweeping changes were made to the financial system, most of them from recommendations of the Campbell report. The Australian
a late development in the running of the World Bank has given hope to some of those espousing this idea. The new president of the World Bank, an Australian interestingly,
Australian shares or property _ International firms setting up branches or expanding in Australia _ Speculators and investors who think the value of the Australian
or momentum trading in determining exchange rates (Reserve Bank Bulletin, November 2000). This relates to traders following the trends or charts of previous movements
Submitted by cindiwong on September 23, 2005
Category: Business
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LETTER OF TRANSMITTAL
This report¡¦s topic is Trends in Australian Bank Capital. The content is as following:
1. The explanation of why ¡§Regulators usually want more equity capital whereas shareholders usually favour less equity capital¡¨
2. The differences between bank equity capital and bank regulatory capital
3. A discussion of the functions of bank capital and the role of the risk-return trade-off
4. The differences between tier 1 and tier 2 capital
5. The components of tier 1 and tier 2 capital and the cost and risk implications of them
6. Details of the trends in the four major Australian banks for the last five years.
1.
In Hogan et al (2004) Page 249 states that ¡§from the shareholders¡¦ point of view, the appropriate amount of capital is an amount that is small enough to produce at least an adequate return on capital and yet is large enough to absorb risk.¡¨ However, bank regulators have the responsibility of protecting depositors¡¦ funds and the safety of the financial system, which requires ¡§banks with higher credit risk to hold higher minimum capital.¡¨
The following table shows the capital ratios for the four major Australian banks over the last five years:
2004 2003 2002 2001 2000
Westpac Banking Corporation Tier 1 6.9 7.2 6.5 6.3 6.6
Tier 2
Total 9.7 10.5 9.6 9.9 9.6
Commonwealth Bank of Australia Tier 1 7.43 6.96 6.78 6.51 7.49
Tier 2 3.93 4.21 4.28 4.18 4.75
Total 10.25 9.73 9.8 9.16 9.75
ANZ Banking Group Limited Tier 1 6.9 7.7 7.9 7.5 7.4
Tier 2 4.0 4.0 2.8 3.2 3.4
Total 10.4 11.1 9.5 10.3 10.2
National Australia Bank Limited Tier 1 7.3 7.7 7.6 7.5 6.6
Tier 2
Total 10.6 9.6 10.0 10.2 9.3
Sources: http://www.anz.com; http://www.commbank.com.au; http://www.westpac.com.au; http://www.nabgroup.com
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