Ralph Norris, ex CBA chief, rejects Murray’s capital demands

Ralph Norris has backed banks in their push against higher capital levels, contradicting predecessor David Murray.

Ralph Norris says quality executives and good risk management are more important.

Ralph Norris, the former banker who steered the Commonwealth Bank through the global financial crisis, has backed the big banks in their push against higher capital levels, seemingly putting him at odds with his predecessor, David Murray.

Mr Norris, who succeeded the long-serving Mr Murray in 2006, said quality executives and good risk management were “always more important than the level of capital”.

“Banks, of course, need an appropriate level of capital, but I’m not convinced Australian banks are overly light on capital compared with their US and European peers,” Mr Norris told an Australian Institute of Company Directors publication.

The comments contrast to Mr Murray’s completed financial system inquiry, which found the big banks were “not currently in the top quartile” globally, where common equity tier one capital ratios were up to 2.2 percentage points higher.

But Mr Norris, who is chairman of Fletcher Building, said APRA’s capital calculation models were “very conservative”, clouding international comparisons.

“Ultimately ... if people want banks to be more highly capitalised, they have to accept returns will be lower,” he told Company Director magazine.

The comments come ahead of APRA’s imminent response to the inquiry’s call for higher mortgage “risk weights” to boost competition in the home lending market, where the big four’s advanced internal modelling capabilities provide greater leverage and returns than other lenders.