By Cecile Lefort
SYDNEY, Dec 17 (Reuters) - Australia's financial watchdog on Thursday said local banks would not have to raise yet more capital to meet global rules, a relief to institutions already facing some of the strictest standards in the rich world.
The Australian Prudential Regulation Authority (APRA) had the option under Basel III rules of requiring banks to build a "countercyclical capital buffer" of up to 2.5 percent of risk-weighted assets.
The buffer forces banks to build up capital during boom periods as one way of making the global financial system safer following the crisis of 2008.
Yet, APRA chose to set the buffer at zero, in part because overall growth in credit has been subdued by historical standards.
"Based on APRA's assessment of current levels of systemic risk, including credit growth, asset prices and lending standards, APRA did not see a case for imposing a countercyclical buffer for Australian exposures at this point in time," APRA Chairman Wayne Byres said.
Earlier this year, Sweden's financial regulator proposed to raise the buffer rate to 1.5 percent.
Australian regulators had already tightened rules earlier this year, ordering highly profitable banks to hold enough capital reserves to make them among the sturdiest in the world.
The banks have raised more than A$20 billion ($14.34 billion) in shares since May with analysts predicting a similar amount needs to be set aside over the next two to three years to bring their capital ratios in line with international peers.
The nation's four major banks, ANZ Bank, Commonwealth Bank of Australia, National Australia Bank and Westpac are among the world's highest rated lenders at double A minus.
Standard & Poor's analyst Nico DeLange said APRA's decision did nothing to challenge the agency's assessment of the banks' capital position.
"They are adequate," he said. S&P has a stable ratings outlook for all the banks.
$1 = 1.3945 Australian dollars Reporting by Cecile Lefort and Wayne Cole; Editing by Michael Perry