From the Glenn Stevens Senate testimony today, the SMH reports the following:
The boss of the Reserve Bank has stood by the actions of the major banks during this month’s latest round of mortgage rate hikes, saying banking is not like a normal business.
RBA governor Glenn Stevens was peppered with questions on the banks during his three-hour interrogation by federal parliamentarians today - aside from their usual quizzing on the economy, the international climate and interest rates.
The major political parties want to encourage banking competition in an attempt to guard against excessive interest rate rises by lenders in the future, but Mr Stevens said this was only good for customers to a point.
"Beyond that point, more competition isn’t good, because bankers get left to do things which ultimately do a lot of damage," he said. "Competition that pushes down lending standards, ends up lending money to people who really shouldn’t get it, that’s not a good thing."
This blogger agrees with the theme but not the method. Competitive private banks balanced with very strong regulatory constraints is what we need. Governor Stevens is defending private profits with public risk.
Moreover, It can't help noting, that some months ago our illustrious Gov argued in another speech that:
The big rise in debt in the past couple of decades has been in the household sector. There have been many reasons for that and, overwhelmingly, households have serviced the higher debt levels very well. The arrears rates on mortgages, for example, remain very low by global standards. As a result the asset quality of financial institutions has remained very good. So, to be clear, my message is not that this has been a terrible thing.
Fair enough this blogger supposes. Except for one thing. The principal cause of the debt explosion was rampant competition between many more banks and unregulated non-banks.
So what are we to conclude? What was good then is bad now. Or, what is good now was bad then? Or, that our regulators are using arguments of convenience to hide the banks' real vulnerability?