From the AFR:
The Macquarie Group business that has become a global player in high-yield debt would be investigated by a Labor government royal commission into banks.
The $33 billion invested by Macquarie in risky debt since 2008 has turned the business’ 44-year-old head, Ben Brazil, into one of the best paid executives in Australia and a power in global finance.
Macquarie’s success has triggered resentment in rival investment banks, who believe Macquarie has used its privileged access to government-guaranteed capital to make risky investments they are blocked from by tougher rules in the US and Europe.
Shadow assistant treasurer Andrew Leigh said investments by Macquarie’s Corporate and Asset Finance division, which are financed by its commercial bank, would be considered by the opposition’s proposed inquiry.
“It is certainly one of those things that a royal commission would be looking into and making sure those activities are consistent with the role of the banking sector,” he said.
…One option would be a version of the Volcker rule in the US, which restricts banks from speculation and proprietary trading and forces them to serve primarily as lenders to individuals and businesses.
…Australian banking regulators, including the Australian Prudential Regulation Authority, have been tough on the big-four commercial banks by forcing them to raise billions as a safety buffer against another crisis.
It is unclear if they are concerned by Macquarie’s high-yield debt strategy. APRA chairman Wayne Byres was asked at a Financial Review banking conference on April 4 if he was comfortable with Brazil’s $33 billion global shopping spree.
“That’s a very good question,” he said to the audience of about 350 banking executives. “But you don’t seriously expect me to respond to that do you?”
Well, yes, Wayne, we do, and pretty swiftly too.
MB is something of a free radical in its space. We admire disruption and appreciate a high quality long/short investor. Ben Brazil is clearly good at what he does.
But not the public purse. Either the implicit funding guarantee is removed, guaranteed, or the activity stops.
It’s not rocket surgery.
