Mac's banking arm gets booster

Macquarie's banking unit sold nearly $920 million worth of shares to its parent company in fiscal 2008, says an analysis of accounts by the Herald.

The bank sold a further $200 million worth of new shares to its parent on April 1, one day after Macquarie closed its books.

For banks, new equity counts directly into a ratio known as tier one that measures capital strength.

Macquarie's chief financial officer, Greg Ward, said new capital had been injected into the bank following a restructure late last year that resulted in some assets, including a leasing business and some trading operations, shifting into the banking arm.

"The group has capitalised the bank to make sure that its capital ratio is able to support those activities. Because the capital is no longer required in the group - it is now required in the bank," Mr Ward said.

In late 2007 Macquarie split its traditional banking activities from its investment banking arm under a non-operating holding company structure. The move was aimed at providing the investment bank the freedom to grow rapidly without the capital constraints of its bank.

But the banking arm has since provided a substantial boost to the broader investment bank, given the benefits from a number of government measures designed to stabilise the financial system.

These include being able to raise long-term funds using the Federal Government guarantee on wholesale funding while enjoying protection from the bank on the short-selling of financial stocks.

The accounts say Macquarie's banking arm has issued the equivalent of $17.6 billion worth of government guaranteed debt since November, but Mr Ward said this funding remained inside the banking unit.

Bank regulator the Australian Prudential Regulation Authority regulates Macquarie at the bank level and group level.

At the end of the March, half of Macquarie's banking unit's tier one capital ratio stood at 11.4 per cent, slightly up from 10 per cent at the end of December.