Banks – Consolidated Group Capital

\n\nThese data are derived from returns submitted to the Australian Prudential\nRegulation Authority (APRA) by banks authorised under the _Banking ActA\n1959_. APR assumed responsibility for the supervision and regulation of banks\non 1 July 1998. Data prior to that date were submitted to the RBA.\n\nPrior to March 2002, banks reported to APR on the _Capital Adequacy Return_.\nFrom that date, banks report quarterly on _ARF 110.0: Capital Adequacy_.\nFollowing the introduction of a new capital framework (Basel II) on 1 January\n2008, the data from March 2008 contain significant breaks. For details of the\nBasel II framework, refer to APR prudential standards APS 110aAPS 116, APS\n120 and APS 150. For detailed definitions of the capital components listed\nbelow, refer to APS 111.\n\naConsolidated groupa, for a locally incorporated bank, refers to the global\noperations of the bank and its subsidiaries, excluding those involved in\ninsurance, funds management/trustee and non-financial business.\n\nThis table excludes data of foreign banks authorised to operate in Australia\nas branches.\n\nMeasures of capital are net of deductions such as future income tax benefits,\nintangible assets, investments in non-consolidated subsidiaries, holdings of\nother banksa capital instruments and other assets that are not eligible for\ninclusion in capital.\n\nThe breaks in Tier 1 and Tier 2 capital in March 2008 are largely due to\nchanges in the items that banks are required to deduct from capital. Under\nBasel II, there are a number of new deductions from Tier 1 and Tier 2 capital,\nand amounts that were previously deducted from the capital base are instead\ngenerally deducted half from Tier 1 capital and half from Tier 2 capital.\n\naTier 1a capital consists of aShare capitala and other Tier 1 capital items.\n\naShare capitala comprises the paid-up value of ordinary shares and non-\ninnovative Tier 1 capital instruments such as irredeemable preference shares\non which dividends are non-cumulative.\n\nOther Tier 1 capital includes retained earnings, certain reserves and\ninnovative Tier 1 capital instruments up to certain limits.\n\naTier 2a capital consists of aUpper Tier 2a capital and lower Tier 2 capital.\n\naUpper Tier 2a capital includes perpetual cumulative preference shares,\nmandatory convertible notes and subordinated debt, excess Tier 1 capital\ninstruments, and revaluation reserves of premises, securities and other\nassets. Under Basel I and the standardised approach to credit risk under Basel\nII, upper Tier 2 capital also includes the eligible amount of provisions for\ncredit losses (up to a maximum of 1.25 per cent of risk-weighted assets).\nBanks using the Basel II internal ratings based approach can include any\nexcess of eligible provisions over the amount of their expected losses in\nupper Tier 2 capital (up to a limit of 0.6 per cent of risk-weighted assets).\n\nLower Tier 2 capital includes limited life redeemable preference shares, term\nsubordinated debt and other similar instruments; it cannot exceed 50 perA\ncent of Tier 1 capital.\n\naTier 2a capital cannot exceed aTier 1a capital.\n\nUnder Basel I, the aTotal capital basea is calculated as the sum of net Tier 1\nand net Tier 2 capital minus additional capital deductions. Under Basel II,\nthe aTotal capital basea is the sum of net Tier 1 and net Tier 2 capital.\n\naRisk-weighted assetsa comprise a acredit riska component and a amarket risk\nand other exposuresa component. Basel II led to significant changes in the\ncalculation of credit risk weights. Under Basel II, banks must also calculate\nan explicit charge for operational risk, which is included in amarket risk and\nother exposuresa from March 2008.\n\naOn-balance sheeta assets represent the risk-weighted gross amounts of banking\nbook assets.\n\naOff-balance sheeta assets represent the risk-weighted credit equivalent\namounts of commitments, derivatives and other business considered to be aoff-\nbalance sheeta prior to the introduction of AIFRS.\n\naTier 1 capital ratioa refers to Tier 1 capital expressed as a proportion of\ntotal risk-weighted assets.\n\naTotal capital base ratioa refers to the capital base as a proportion of total\nrisk-weighted assets.\n\n