* Major banks would need to lift capital levels by 200 bps - APRA
* Final decision on capital, timeline yet to be made
* Regulator to announce changes to mortgage risk weights "shortly" (Adds comments from Australian banks paragraph 6)
By Swati Pandey
SYDNEY, July 13 (Reuters) - Australia's major banks should increase their capital ratios by at least 200 basis points to put them on par with international peers, the financial regulator said on Monday, quantifying its recommended level of increase for the first time.
Capital ratios at Australia's major banks - Commonwealth Bank of Australia CBA.AX , Westpac Banking Corp WBC.AX , ANZ Banking Group ANZ.AX and National Australia Bank NAB.AX - stand at 11.7 percent, the study found. By comparison, the tier-I capital ratio for U.S. banks stand at 12.7 percent, according to Thomson Reuters data.
The Australian Prudential Regulatory Authority (APRA) has said capital levels of banks should be "unquestionably strong" and among the top quartile of international lenders. ID:nL3N0TR09L
"The key difference is they've actually quantified the impact," said Omkar Joshi, an investment analyst who helps oversee about A$1 billion ($743.4 million) at Watermark Funds Management Pty, referring to the APRA report.
The regulator, however, has yet to make a final decision on the matter, or set banks a deadline for lifting their capital. Any strengthening should be done "over a reasonable transition period", the APRA added.
In a statement, NAB said it was "well placed" to respond to any changes in capital requirements. ANZ said the indicated increase was within its own planned range, and that it had various options to raise funds, including selling assets.
The regulator also flagged it would "shortly" announce standardised measures to evaluate mortgage risks for the banks, which have already taken steps to boost capital and rein in risky mortgage lending amid fears of a housing bubble in Sydney and Melbourne. ID:nL4N0XX5S0
Analysts expect the APRA to enforce an increase in risk weights on mortgages to 25-30 percent, significantly higher than the 15-21 percent they currently hold.
Among the banks, ANZ's capital ratios look the weakest, analysts said, while NAB, which recently raised A$5.5 billion through a rights issue of shares, is seen as having the strongest balance sheet. ID:nL4N0XX5JB
The banks would together need between A$22 billion and A$41 billion to move to the top quartile, according to estimates from five analysts.
The "big four" have already taken steps to boost capital by selling assets and through share sales, and analysts say the banks are likely to take similar measures soon. ($1 = 1.3452 Australian dollars)