Shares in Major Banks Surge after Response to Increased Capital Reserve

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By Athena Yenko | December 24, 2013 7:53 PM EST

Shares in the Commonwealth bank, Westpac, NAB and ANZ surge after four major banks respond to increased capital reserve from The Australian Prudential Regulation Authority (APRA).

At 2:30pm (AEDT), shares in the Commonwealth Bank and Westpac shares were up by 0.7 per, NAB was 0.5 per cent higher and ANZ was flat.

The surge happened after the four banks announced its acceptance of the new rule as set by APRA forcing the banks to boost the cash they hold in reserve as a safeguard against the impending financial crises in the country. The new rule was made under the conclusion that tax payers should not be compelled to withdraw their accounts if indeed a global financial crisis struck the country.

"Over time and through organic capital generation, ANZ may modestly increase its capital buffers from current levels," as stated in an official statement from ANZ released to the share market.

"Following these announced changes Westpac will review its preferred capital levels noting that there is potential for the additional capital conservation buffer to substitute, in part, for existing management buffers. This review will take place over 2014." Westpac said in a statement.

Meanwhile the Commonwealth bank reiterated that its present capital in position is already beyond what APRA had required.

NAB offered assurance that its capital position will be able to meet the new requirements from APRA.

APRA increased the capital reserve requirement by 1 per cent for banks to make available billions of dollar in financial assets deemed safe by financial regulators. The rules will take effect from Jan 2016.

"The Basel Committee's framework responds to the strongly held view of the G20 Leaders, including Australia, that no financial firm should be 'too-big-to-fail' and that taxpayers should not bear the cost of resolution. The framework also emphasises that other policy tools, such as more intensive supervision, can play an important role in dealing with domestic systemically important banks," APRA said in a statement.

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