Problem
Your supervisor has asked you to use the data in the following table when you are assessing whether the shares in the banks should be considered as a possible investment for the super fund.
Source: KPMG - Major Australian Banks Half Year 2019 Results Analysis
A. Using the information in your textbook concerning Financial Regulations and Capital Requirements, explain whether the Capital Adequacy Ratios alone indicate that we could or could not consider investing in the shares of all four major Australian Banks.
B. Based on the Capital Adequacy Ratio data, identify which of the banks is the most unlikely to experience financial distress in the event of another serious financial crisis like the GFC occurring. Why?
C. If a bank significantly increases the proportion of its assets which are residential mortgages, explain what impact this will have on its capital adequacy ratio?