Effect of Higher Capital Requirements on the Funding Costs of Australian Banks

Cummings, JR; Wright, S

Effect of Higher Capital Requirements on the Funding Costs of Australian Banks

Cummings, JR Wright, S

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Publisher:: WILEY
Publication Type:: Journal Article
Citation:: Australian Economic Review, 2016, 49, (1), pp. 44-53
Issue Date:: 2016-03-01

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Field	Value	Language
dc.contributor.author	Cummings, JR
dc.contributor.author	Wright, S https://orcid.org/0000-0001-8634-1428
dc.date.accessioned	2022-02-23T21:06:51Z
dc.date.available	2022-02-23T21:06:51Z
dc.date.issued	2016-03-01
dc.identifier.citation	Australian Economic Review, 2016, 49, (1), pp. 44-53
dc.identifier.issn	0004-9018
dc.identifier.issn	1467-8462
dc.identifier.uri	http://hdl.handle.net/10453/154817
dc.description.abstract	The 2014 Murray Financial System Inquiry recommends that Australian banks be required to have higher capital levels. This article examines the arguments about the impact of higher capital requirements on banks' funding costs and assesses their relevance to the Australian banking sector. Based on scenario analysis, we estimate that higher capital requirements will result in a modest increase in the borrowing costs faced by bank customers (in the order of 20 basis points annually for a 5 percentage point increase in the ratio of equity capital to bank assets). We discuss other consequences of higher capital requirements for the Australian banking sector.
dc.language	English
dc.publisher	WILEY
dc.relation.ispartof	Australian Economic Review
dc.relation.isbasedon	10.1111/1467-8462.12138
dc.rights	info:eu-repo/semantics/closedAccess
dc.subject	14 Economics
dc.subject.classification	Economics
dc.title	Effect of Higher Capital Requirements on the Funding Costs of Australian Banks
dc.type	Journal Article
utslib.citation.volume	49
utslib.for	14 Economics
pubs.organisational-group	/University of Technology Sydney
pubs.organisational-group	/University of Technology Sydney/Faculty of Business
pubs.organisational-group	/University of Technology Sydney/Faculty of Business/Accounting Discipline
utslib.copyright.status	closed_access	*
dc.date.updated	2022-02-23T21:06:50Z
pubs.issue	1
pubs.publication-status	Published
pubs.volume	49
utslib.citation.issue	1

Abstract:

The 2014 Murray Financial System Inquiry recommends that Australian banks be required to have higher capital levels. This article examines the arguments about the impact of higher capital requirements on banks' funding costs and assesses their relevance to the Australian banking sector. Based on scenario analysis, we estimate that higher capital requirements will result in a modest increase in the borrowing costs faced by bank customers (in the order of 20 basis points annually for a 5 percentage point increase in the ratio of equity capital to bank assets). We discuss other consequences of higher capital requirements for the Australian banking sector.

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http://hdl.handle.net/10453/154817