G20 banking rules raise alarm for Oz banks

AUSTRALIAN banks are expected to resist G20 leaders' calls for tougher prudential regulation, arguing they are being unfairly punished for the greater risks taken by struggling global banks.

Leaders of the G20 group of nations this week agreed to tighten prudential standards, with tougher rules for capital ratios, provisioning and exposure to trading instruments, as well as calls for limits on management pay.

But bank executives yesterday described the proposed G20 rules as "unnecessary" for Australia.

"Because we've had good regulation and we didn't go out on the risk curve, we're all in a pretty good position," said one executive at a major bank, who would speak only on the condition of anonymity.

"I think the Government needs to look very closely at the additional benefits these measures will bring to what is already a strong Australian financial services sector, and move very cautiously if they want to go down the route of re-regulation," the executive said.

The Reserve Bank last week declared the Australian banking system "considerably better placed to weather the current challenges" than the sector in most other countries. In contrast to the experience in many countries, the banking system in Australia had performed well over the past year, the RBA said in its assessment of the nation's financial system.

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G20 banking rules raise alarm