Banks could be forced to buy up billions of dollars of federal and state bonds under new rules designed to ensure they are in a strong position to weather any future financial crisis.
An Australian Prudential Regulation Authority (APRA) consultation paper includes a proposal that would require banks to increase their holdings of government-issued bonds because international regulators have decided sovereign bonds are the most reliable source of liquidity, The Australian Financial Review reported.
This weeks G20 leaders summit is expected to endorse action on liquidity rules as part of wider reforms to the global financial system.
The reforms will cover limits on executive salaries and caps on bank capital.
This as the IMF warned governments to take a cautious approach to disengaging from recent crisis interventions.
Meanwhile, Australian banking representatives are concerned about the impact of the new rules on their profits.
So much so that the Australian Bankers Association has warned that APRA may need to diverge from world practice.
"Ultimately APRA must come up with a regime which is suitable for Australia," it said.
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