As an Australian Prudential Regulation Authority (APRA) authorised and regulated Non-Operating Holding Company, Macquarie Group Limited (MGL) is required to hold adequate regulatory capital to cover the risks for the whole Macquarie Group, including the Non-Banking Group. Macquarie and APRA have agreed a capital adequacy framework for MGL, based on Macquarie's Board-approved Economic Capital Adequacy Model (ECAM) and APRA's capital standards for ADIs.
MGL's capital adequacy framework requires it to maintain minimum regulatory capital requirements calculated as the sum of:
As at 30 September 2012 MGL had capital of $12.4 billion, $4.1 billion in excess of MGL's minimum regulatory capital requirements under Basel II.
APRA is requiring Australian banks to follow an accelerated Basel III implementation compared to the Basel Committee’s gradual phase-in of Basel III, with a minimum Common Equity Tier 1 (CET1) ratio of 4.5% required by January 2013 and immediate phase in of additional CET1 deductions. In addition, APRA has added conservative overlays (‘super equivalence’) to the Basel Committee’s Basel III capital requirements.
Macquarie’s position at 30 September 2012 meets the APRA 2016 Basel III requirements, i.e. minimum ratios plus capital conservation buffer.
New transactions at Macquarie are now evaluated on a fully implemented Basel III basis, and all businesses are operating cognisant of Basel III.
For more information on Macquarie's ECAM model and MGL's capital base read the latest Management Discussion and Analysis.