australian banks need to boost capital ratios by billions of dollars 903392014

The US jobs report on Friday that blew away analysts’ expectations and pointed to robust economic growth in the country powered the US Dollar index to the largest weekly gain in five weeks, and its highest level since March 2009. 

The Australian Dollar plunged lower to 83.00 US cents, down by 0.87 per cent. At 09:18 am AEDT, the Aussie was trading at 83.10 cents.

The US Dow Jones Industrial Average closed Friday at 17,959 after hitting a fresh intra-day record, while the S&P 500 rose to 2,075. Positive data on German factory orders and hopes that the ECB would commence quantitative easing by January lit up the European stock markets, and the German DAX in particular which scaled a new peak, according to Bloomberg.

February's gold futures fell 1.26 per cent to US$1,192.50 as the yellow metal lost some of its safe haven sheen.  

David Murray’s Financial System Inquiry said in a 320-page report released on Friday that Australian banks needed to boost their capital ratios if they wanted to be in the top first quartile of international banks, and thereby reduce their financial risk which could be as high as AU$2.4 trillion. The report said the current average 9.1 per cent capital level of Australian banks was below the 12.2 per cent required to make it into the top quartile internationally. This would require billions of dollars of additional capital, said a report in the Sydney Morning Herald, and should primarily be in the form of increases in CET1, “the highest quality form of capital providing the greatest level of protection against a bank failing.”

The report also suggested measures to improve the country’s AU$1.8 trillion superannuation system and to give more teeth to regulators, as well as more autonomy such as providing ASIC and APRA with a three-year funding model. 

According to The Australian, which quoted Trade and Investment Minister Andrew Robb, Australia is on course to join the Asian Infrastructure Investment Bank, a China-led initiative. “It’s the wish of everyone in the cabinet, from the Prime Minister down,” Mr Robb said in Beijing. “Tony Abbott has said publicly that we shall not only join, but do so enthusiastically.”

Brazilian mining giant and the world’s biggest iron producer, Vale SA (BVMF:VALE5) said at its investor meet on Friday that the more than US$60 fall in iron ore prices this year was overdone to the downside, and that a bounce back in the near future was very much on the cards, according to The Australian. With almost 220 million tonnes of “non-competitive” iron ore out there, Mr Peter Popping, who is Vale’s executive director of ferrous minerals, said lots of Chinese, private and coastal iron ore producer companies were exiting the iron ore market, as well as "some other junior and other seaborne market competitors."

The ASX closed in negative territory on Friday, with the S&P/ASX200 down 33.5 points (-0.6 per cent) to 5,335.3 and the All Ordinaries down 31.8 (-0.6 per cent) to 5,313.6. The S&P/ASX200 Futures is trading at 5360.50, down 17.30 points (-0.32%) at 09:18 am  AEDT today.

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