Wednesday, November 3, 2010

Hats off to a real banker

The SMH reports that today the chairman of Adelaide/Bendigo Bank Robert Johnon has called for a new Inquiry into banking:
Bendigo and Adelaide Bank Ltd has called for another parliamentary inquiry into Australia's financial system to address the banking system's reliance on offshore funding.

Bank chairman Robert Johanson told shareholders he hoped the Senate's inquiry into banks would result in a better articulation of proper community expectations for the banking system than the current political furore over banks' profits and interest rates.

"Hopefully it will not just be a whinge session," he said at Bendigo's annual meeting held simultaneously in Adelaide and Bendigo on Wednesday.

"Another Campbell-type inquiry into the financial system we think would also be warranted, not a Wallis-type inquiry into bank regulation where Australia's system proved so successful over the past decade.

"I certainly hope it will have a more ambitious brief than Mr Hockey's list of nine questions," he added, referring to opposition treasury spokesman Joe Hockey's nine-point plan for bank reform.

Mr Johanson said such an inquiry should be conducted after global banking rules setting capital and liquidity requirements were finalised.

The Campbell inquiry into the Australian financial system was established in 1979 to recommend changes to the regulatory structure of the financial system to promote efficiency and stability.

Its final report in 1981 contained 260 recommendations covering all aspects of regulation, and said many regulations should be removed, but government intervention in the sector should not be completely abandoned.

Mr Johanson told shareholders an inquiry into the financial system was needed to address Australian banks' reliance on offshore funding.

He said it was also necessary to work out whether incentives were needed to encourage the $1.5 trillion in superannuation savings to flow into domestic interest bearing securities that could help fund the local banks and reduce Australia's structural savings deficit.

The current incentives faced by banks to provide cheap lending for housing instead of business should also be questioned to decide if this was in Australia's long-term national interest, he said.

Well, bugger this blogger. A real banker at last. Not some ponzi lord clipping the ticket on a force fed balance sheet. Fantastic!

This steady, well reasoned position should be contrasted with the grotesque spin emanating from the Australian Bankers Association today. Also from the SMH:
The banking industry has defended the rights of banks to make unilateral interest rates rises, arguing bumper profits are needed to allay concerns of international investors about a potential housing bubble.

... The Australian Bankers' Association, the industry's main lobby group, today attributed worries about Australian house prices on overseas markets as part of the reason for any extra rate hikes by its members.

“Over the last few weeks, we've had a lot of international investors asking very detailed and probing questions about why it is Australia thinks it doesn't have a housing bubble,” said ABA's chief Steven Munchenberg.

"Bankers were grilled at length as to why investors should not be worried Australia has a housing bubble,” he said. Australia's banks remain “very conscious of the risks of international investors becoming nervous about investing in Australia. “

So now, after being plied by arguments of convenience from CBA and Westpac (and Fitch) that there is no bubble, we're supposed to swallow this from the banks' main lobby.

Looks like panic is setting in.


Anonymous said...

"Bankers were grilled at length as to why investors should not be worried Australia has a housing bubble,” he said. Australia's banks remain “very conscious of the risks of international investors becoming nervous about investing in Australia. “

Obviously the overseas investors didn't feel reassured, as the CBA was forced to up interest rates by 0.45% to cover their increased cost of funding.

I have friends that were notified by the CBA about the increase of interest rates on their mortgages within an hour of the RBA official release.

It looked like they had the paperwork ready to go regardless of the RBA's move,only the amount of the interest rate rise had to be typed in.

PeterJB said...

I am not impressed that much, as those that maintain the banking structure are "leadership", ie, those that will implement and such inquiry and I am an old man with hoary with experiences; it will not happen and history, repeated history, for the past ~4,000 years tells us, that "leadership" will a priori, support the banking system until all burns; follow the money. Now, read M. Hudson

The problem is the banking system's relationship with "leadership" and its corrosive effects, which are a matter of historical written record.
"He who has the money owns the game"
"All that needs to be said, has been said!"

Good article