Terry McCrann has an awful take on the prospects for genuine reform from the conflicted Murray Inquiry today:
…we are pretty well served by our financial system and the banks in particular.
Again there are many complaints made about the banks. While many are legitimate, many also tend to range from the trivial to the completely unrealistic.
But even so, no one would seriously suggest we go back to the world of stultifying regulation and control of banks.
So much of the work of the Murray inquiry should be focused on making what we have work better.
There’s no obvious revolutionary change to be worked out. Although Murray has nominated the banks’ dependence on foreign capital, especially after the Global Financial Crisis, as a major issue.
While that has been true for close to 200 years – we’ve always grown by using foreign capital – it’s taken on an added edge after the GFC.
And it does highlight a potentially big issue for this inquiry: the interfaces between our financial system, the funding of infrastructure and the $1.7 trillion superannuation system.
…Some will be looking to Murray to deliver sweeping reform. Like, breaking up the big banks, giving small business greater access to finance, and so on. They will be disappointed. Murray will have done a good job if he comes up with recommendations that tweak rather than overturn what we have now.
This is simple circular argument. The system works so the system works. It shouldn’t even be published.
Similar sentiments are expressed by bank lobbyist John Brogden at the AFR:
The review panel must ensure that Australia is not saddled with regulatory proposals that seek to solve problems that do not exist in the Australian financial system. At the same time, there is a need to take advantage of the opportunities that increased global co-ordination can offer. Through more consistent regulation, we can substantially reduce costs for global firms and international Australian firms.
We need to ask whether Australian-centric regulation is the answer in an increasingly globalised world.
The more regulatory layers we impose, the more expensive doing business in Australia becomes. Should we substitute local regulations with global regulations? This is a question that the Special External Council established to advise on international competitiveness and offshore regulatory frameworks must answer.
As an industry we must participate in key global standard-setting forums and in global financial system debates. If we stand back we risk having to accept the outcomes without having had an opportunity to shape them.
Change is required, but it is important that the Murray Review does not buy into the culture of overregulation that is permeating global discussions on financial regulation. For this reason, the inquiry’s focus on efficiency and competitiveness is strongly welcomed by the industry.
In other words, we don’t have any problems so there is no need for solutions. More circular clap trap. This shouldn’t be published either.
Even Andrew Cornell‘s brief moment of objectivity has passed:
Much has been made the lack of a corporate bond market of any scale in Australia and the lack of fixed income – and increasingly annuity-style retirement products – for retail investors. Much research has been done on these particular issues. The inquiry is the perfect opportunity to consider that work from a system-wide perspective.
Competition is another fundamental consideration but again, it must be competition in the sense that in most circumstances, removing barriers and distortions delivers the best outcomes as long as it comes with transparency to allow sound risk assessment.
It would be counterproductive to allow political interests to designate the nature of competition, whether that is in the guise of picking potential new competitors and supporting them in some way, or hobbling existing players. So yes, looking at why smaller institutions are handicapped by capital charges which do not appear justifiable in relation to the risk of underlying assets, making them less able to compete with the big banks, makes sense but don’t tilt the system because it sounds like a good idea to make regional banks more competitive.
Hopefully this inquiry will be allowed to run with genuine independence, bearing in mind Murray’s close ties to the Liberals, so its recommendations have credibility.
There is no chance of that so long as the inquiry doesn’t even mention what it really needs to be about:
- how to address too-big-to-fail;
- how to remunerate the public for their support, while
- we decide what kind of reform will stabilise banks without public support.
David Murray did his bit to create these very real and very large problems. The circulatory of arguments defending his inquiryless inquiry are a nice compliment to his recall to fix what is not broken.
