By Eric Johnston
AUSTRALIA'S banking regulator has told lenders there will be no local exemptions from impending tough global banking rules aimed at preventing financial shocks.
The Australian Prudential Regulation Authority has also insisted it will not automatically water down existing local bank rules if the new global proposals fall short.
But if Australia's bank regulations do not meet the new standards, APRA has pledged to operate under the tougher rules.
Since the onset of the financial crisis, leaders from the G20 nations have demanded tougher regulations on the banking sector. In turn, the Basel Committee, a global banking regulator, is developing standards aimed at making banks safer.
Among these are requirements that banks boost their holdings of top-rated government bonds, introduce limits to bank leverage and top up capital buffers during good times. But local banks have argued they should be exempt from some of the rule changes given they emerged from the financial crisis relatively unscathed.
There is also concern that Australia's relatively small government bond market will mean banks will struggle to secure enough liquid assets to meet the new standards. Some analysts have estimated the big local banks will soak up nearly all the supply of federal and state government bonds.
In an update to the banking sector over the new global rules being developed, APRA executive general manager Wayne Byres said there would not be any exemptions or carve-outs for Australia in the Basel changes.
While there was an opportunity for Australia to have ''slightly different'' rules to reflect local conditions, any changes must be in the form of an equivalent alternative.
''There is no capacity for Australia to argue that we should have weaker rules than the rest of world,'' Mr Byres said. ''The rest of the world wouldn't give us that concession and we wouldn't ask for it.
''It's still our responsibility to come up with a framework that is equivalent to what the rest of the world is doing.''
Mr Byres said there was still some way to go before the rules were finalised, but some broad proposals were expected to be ready by November's summit of G20 leaders.
However, he said there would be consultation with the nation's banks over the next two years to translate the global standards into Australian prudential standards.