Guy Debelle on Banking

Guy Debelle , the Assistant Governor (Financial Markets) of the RBA gave a speech this morning to the  Conference on Systemic Risk, Basel III, Financial Stability and Regulation.

Today I am going to talk about a few interrelated issues concerning the banking system: collateral, funding and liquidity.

The financial crisis brought into sharp relief the liabilities side of a financial institution’s balance sheet, that is, the funding structure. This had previously been somewhat neglected, but the fates of Northern Rock, Bear and Lehmans were clearly affected by the nature of their funding. While their funding structure played a significant part in the downfall of those institutions, I would argue the ultimate concern was about the quality of their assets. The funding problems were symptomatic of concerns about asset quality.

In my view, the pendulum has swung too far in focusing on liabilities. Such a swing is evident in the proposed change to Standard & Poor’s ratings methodology for the global banking system. The proposed new methodology shifts the assessment of financial strength of an institution markedly towards funding and away from asset quality. Asset quality should still be paramount and should be given a far larger weight than liabilities in assessing financial strength, along with the extent of leverage (capital).

The solvency of any bank first and foremost is a function of the quality and value of its assets. This is, of course, true of any entity, but it is particularly true for banks because of the implications asset quality has for liquidity and because of the leveraged nature of financial institutions.

The crux of my argument today is this: if I am a creditor of a bank, my due diligence should be spent mostly on assessing the asset side of the bank’s balance sheet in determining whether or not I will get repaid in full. If asset quality remains high, I should be confident of being repaid.

Financial institutions prior to the crisis had been in what might be described as an asset-driven world. Banks grew their asset portfolio on the assumption (which was generally realised) that the funding required would be easily forthcoming to support the asset growth. To paraphrase Field of Dreams, the financial environment was ‘if you lend it, they will fund’.

That environment has been turned on its head by the financial crisis. Financial institutions are now in a funding-driven world. They can no longer assume that the funding will be readily forthcoming at a given price. We are now much more in a liability-driven world.

So the structure and maturity profile of liabilities does bear close analysis. Because banks are in the business of maturity transformation, liabilities mature at a faster pace than assets. Assets can be difficult to liquefy in the market, particularly in stressed circumstances. As a result, a bank generally meets the need to repay its liabilities as they fall due by issuing more debt.

But the bank’s ability to refinance its maturing liabilities still fundamentally depends on the asset portfolio. An investor’s decision as to whether it will be willing to lend to the institution will be based on its credit assessment of the institution’s assets. If there are doubts about the quality of that asset portfolio, a bank will find it considerably more difficult to obtain more funding.


I will now focus more directly on the important relationship between asset quality and liquidity.

If a bank is experiencing a problem of illiquidity, the state of its asset portfolio is even more paramount. This relates to one of the fundamental tenets of central banking, most famously associated with Walter Bagehot. Writing in Lombard Street in 1873, Bagehot states that central banks should lend freely (ie, liberally) at a high rate to solvent but illiquid banks that have good collateral.

There are a number of important elements to Bagehot’s statement which I am going to discuss in some detail.

Starting at the end of the statement, and germane to the argument thus far, is that the bank must have good collateral. Therefore, critically, it is the asset side of the balance sheet which enables the bank to overcome a problem on the liabilities side: the central bank must be sure that it is lending against good collateral.

The second aspect of the statement which bears further discussion is that the central bank should lend to solvent but illiquid banks. I don’t see this as being materially separable from the collateral issue. As I have argued above, a bank’s solvency is most strongly influenced by the quality of its collateral. Capital and leverage play an important role too.

It is sometimes said that it might be difficult to determine whether the issue really is one of solvency rather than one of liquidity. Clearly, the fact that a liquidity issue has risen may well be a signal that the market has concerns about solvency. Hence the central bank certainly should pay heed to that signal from the market.

But the experience of the past few years demonstrates liquidity crises can arise because of uncertainties that can be exacerbated by funding structures which are heavily skewed to the short term. In keeping with my argument thus far, in my opinion, it behoves the central bank to look through those uncertainties to the underlying asset quality of the institution under question, and be prepared to lend secured against quality assets if the situation warrants.

This is particularly true when there is systemic uncertainty. That is, counterparty risk aversion increases. Such instances have arisen on a number of occasions in recent years. As I have said before, in those circumstances, the central bank acts not so much as lender of last resort, but as intermediary of last resort. Participants in the market are uneasy about lending to each other at any price, secured or unsecured, because of concerns about the solvency of the counterparty. The central bank can refrain from participating in the risk aversion and intermediate this process across its own balance sheet, thereby ameliorating the tensions created by the shortage of liquidity in the market.

Together with the provision of liquidity, there may also be a need for the central bank, or prudential regulator, to provide information about the quality of banks’ balance sheets to reduce the uncertainties that pervade. One could characterise the stress tests conducted in the US in the middle of 2009 as an example of this. Moreover, by providing the liquidity (against collateral), the central bank is indicating its confidence in the solvency of the institutions that can be reinforced by this provision of information.

The final aspect of Bagehot’s statement is that the lending should be at a high rate. But a higher rate than what? A relevant benchmark is the rate at which the central bank provides liquidity in its normal operations. In the Reserve Bank’s case, that is a rate which is a small spread (normally less than 10 basis points) to the cash rate. Emergency liquidity provision would clearly need to be a higher rate than this, otherwise institutions would avail themselves of this source of liquidity even in normal times. That is, the central bank should be a last resort, not a first resort.

Within the Reserve Bank’s operating framework, a reasonable benchmark would be the rate charged on the standing overnight facility, which is 25 basis points above the cash rate.This facility is called upon at various times throughout the year, generally as a result of small unexpected technical hitches in the money market. For example, over the past financial year, it was utilised on two occasions, with a total of $363 million drawn, and for a term of no more than one day.

But in a stressed situation, that rate is still likely to be less than the market rate, as otherwise there would be no need for recourse to the central bank. Thus the rate is penal relative to the normal cost of liquidity provision but not necessarily relative to the stressed market price of funding, a distinction which is often overlooked in such discussions.

It is also worth noting that the central bank can apply a haircut to the value of the collateral it is lending against. That is, it will not lend dollar for dollar against the collateral but rather against some (generally large) fraction of its value. This provides protection to the central bank. Of course, the issue of value can be difficult to determine in stressed situations. The current market price may well not be an adequate guide to the value of the collateral. But the central bank can ensure adequate protection for its liquidity provision by setting an appropriately sized haircut. That said, if the central bank assesses that there is indeed little concern about the quality of the collateral, this should not be too much of an issue.

The final issue that often arises about the provision of liquidity support by the central bank is that of stigma. During the crisis, in some jurisdictions, banks were clearly loath to approach the central bank because of concerns about stigma. That is, the call on the central bank’s liquidity facility, in and of itself, would exacerbate the stresses the institution was facing.

In Australia, this has been much less of an issue. In part, I believe this reflects the design of the Reserve Bank’s market operations system. The key aspect is that a wide range of counterparties deal with the Reserve Bank on a regular basis as part of our daily liquidity operations. Hence banks are accustomed to dealing with us and have a well-established relationship with us.

To recap, there is an important role for a central bank to play in a fractional reserve banking system as the lender of last resort. This is particularly the case in dealing with liquidity events where the central bank’s provision of liquidity can be regarded as a public good.As noted, the central bank does not provide the liquidity insurance for free; it is at a penal rate. Moreover, the institution must hold an adequate amount of collateral that is of acceptable quality to the central bank to lend against. Such collateral may well deliver a lower rate of return than other assets the bank might otherwise hold (although not necessarily so on an appropriately risk-adjusted measure).

In that regard, I will now turn briefly to the Basel liquidity standards. The aim of those standards is to reduce the frequency with which banks might need to seek assistance from the central bank in a liquidity event to a very small number. It does so by making the size of the liquidity buffer banks are required to hold dependent on the structure and maturity of funding. Thus, while the central bank can ultimately liquefy part of the balance sheet of a solvent institution in times of liquidity stress, in expectation, this would be a rare event. An institution should not be careless about its funding structure on the presumption of that support.

Relevant to the arguments I have presented thus far, the Basel standards also make determinations around the quality of assets that can be held. The Basel guidelines focus primarily on government debt as the liquid asset. That is clearly not possible in Australia, given the prudence of governments over a long run of years. The amount of government debt that the Australian banking system would need to hold to meet the liquidity standard is in excess of the stock on issue. Moreover, if the banks were to hold the stock on issue, the government bond market would no longer retain any liquidity, which would be completely self-defeating.

Hence it was announced late last year that the RBA would provide a committed liquidity facility to meet the shortfall between banks’ holdings of government paper and their total liquidity needs. The banks will be charged an ongoing fee to be able to access the facility, the size of which is still under consideration. The eligible assets for the facility are those currently eligible for the Reserve Bank’s market operations.

Funding and Assets of the Australian Banking System

Having talked thus far about the fundamental importance of collateral quality in determining solvency and in determining liquidity provision, I will now spend the remainder of my address talking briefly about recent developments in the asset and liability structure of the Australian banking system.

On the asset side, the most marked development has been the slowing in aggregate credit growth. Lending for housing has slowed from the double digit pace of the two decades until 2007 to its current pace of around 5–6 per cent. This is noticeably slower than growth in household income, which was over 8 per cent in the year to March. For those who like to agonise about debt to income ratios, which I personally don’t, this implies a marked change in that dynamic.

On the corporate side of banks’ assets, growth has been very subdued reflecting a number of different dynamics. The large investment boom currently underway is being financed in quite a different way from growth episodes in the past. Companies in that sector are funding themselves from cash or directly from global financial markets. Hence the domestic banking system is seeing much less of that business than in the past. To put it another way, intermediated business credit is likely to grow a lot slower in the period ahead than historical relationships with GDP and investment would lead one to believe. Finally, lending conditions to the commercial property sector remain tight as banks are still reluctant to increase their exposure to that sector.

The changes in funding structure of the banking system are also quite stark (Graph 1). Most notably, there has been a marked increase in the share of deposit funding. Over the past three years, banks’ deposit funding has grown by about 15 per cent per annum. As a result, deposits have also increased by about 9 percentage points as a share of overall funding liabilities. There has been strong growth in deposit growth from households as well as businesses. The former reflects the increased saving rate of the household sector, much of which has flowed to the banking sector. The latter partly reflects the strong growth in corporate profits, particularly in the resources sector. While growth in business deposits has been considerably faster over the past 12 months, household deposit growth has still been a very robust 9 per cent.

Through late 2009 and early 2010, the strength of growth in deposits reflected, in part, the intense competition amongst the banks for deposits.This saw the yield on deposits rise markedly as the Reserve Bank has documented in its regular output over the past few years. But that competition appears to have levelled off in recent months, yet deposit growth has still continued at a robust pace. I would characterise the recent growth as being more an endogenous counterpart to the change in the growth and funding composition of the economy as a whole. One might expect that robust endogenous deposit growth to continue for some time yet.

There has also been a significant drop in the share of short-term wholesale funding, reflecting regulatory and market pressures. The share of long-term wholesale funding has correspondingly risen, as banks have sought to term out the maturity of their liabilities. One noteworthy development that has generally escaped attention is that banks have raised less of this wholesale funding from offshore than has matured over the three of the past four quarters. That is, in net terms, the banks have been repaying their foreign liabilities.

The Australian banks’ use of offshore funding sources was particularly visible through 2009. They were a relatively large share of global bank debt-funding in that year, but that as much reflected the decrease in the number of highly rated institutions, as well as a lack of borrowing by other banks around the world through that period, as it did a pick-up in borrowing by the Australian banks. (That is, it was as much a function of the denominator shrinking as the numerator growing.) The Australian banks are a much smaller share of the global market again now given they are raising relatively less and banks in the rest of the world are raising relatively more. This is likely to remain the case for the foreseeable future.

Finally, to link back to the arguments I made earlier, I will talk briefly about concerns surrounding the extent to which Australian banks rely on foreign funding. If a liquidity issue were to arise around this funding, it is of critical importance that the foreign-currency denominated funding is fully hedged into Australian dollars, which indeed it is. This means that the liquidity issue is in Australian dollars rather than in foreign currency. As I discussed earlier, an Australian dollar liquidity issue can be addressed by the Reserve Bank. The Reserve Bank can meet a temporary liquidity shortfall by lending Australian dollars against the stressed bank’s assets denominated in Australian dollars. The vast bulk of the Australian banking system’s assets are denominated in Australian dollars.

This stands in comparison to the situation of a number of European banks that funded US dollar assets with US dollar liabilities which had been swapped out of their local currency. When liquidity issues arose for those European banks, the ECB was constrained in its ability to provide the foreign currency liquidity to address those stresses.


The main argument I have presented here today is that it is the asset quality of a bank which is the primary determinant of a bank’s financial strength. The asset quality affects both the ability of the bank to raise funding in the market and also, importantly, has a first-order effect on the ability of the institution to obtain liquidity support from the central bank during a stressed situation. While the funding structure of a financial institution warrants close scrutiny, an investor in that institution should pay the greatest scrutiny to the asset side of the balance sheet.

All up an interesting and well balanced speech, and an interesting insight into the mind of the RBA around banking stability and the central banks role. His comments about the liquidity utility (otherwise known as t he “discount window”) were very interesting because they differ somewhat from my perception of other central banks use of such as facility.

I have a couple of other comments about this speech.

Firstly, I found it interesting that his comments focused on the fact that the central bank was able to provide liquidity support for banks that are solvent yet illiquid, but he did not mention the fact that the government provided explicit and implicit support for banks via funding guarantees. If it is the case that a central bank is able to provide liquidity support for banks then why is the Australian taxpayer on the hook to backstop the banks? And why was this particular point not mentioned in the speech ?

Secondly, in his conclusion he states that he believes that the important part of a bank’s balance sheet is the asset side. Yet he also stated in regards to assets that:

On the asset side, the most marked development has been the slowing in aggregate credit growth. Lending for housing has slowed from the double digit pace of the two decades until 2007 to its current pace of around 5–6 per cent. This is noticeably slower than growth in household income, which was over 8 per cent in the year to March. For those who like to agonise about debt to income ratios, which I personally don’t, this implies a marked change in that dynamic.

This seems to be somewhat disconnected logic in my mind. Private sector leverage is extremely important in determining the asset quality of the banks, and the fact that credit growth is now at 30 year lows is a actually a big concern for the banks. As the Unconventional Economist noted last week, Gail Kelly from Westpac all but admitted that the banking sector needs increased levels of mortgage issuance to stave off delinquencies. It has also previously been reported by Deep T that banks have used the increasing value of their mortgage book to re-adjust their asset to equity ratios. If the housing market does collapse by 15-20% then banks may need to source additional Tier 1 capital at a time where their value is under pressure.

The level of private sector debt, the level of new issuance and the quality of existing banking assets are not 3 separate things. In my opinion they are intrinsically linked but I think Mr Debelle has missed that point.

I would be interested to hear others comments on the speech.

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  1. I dont have a comment…its more of a…


    “For those who like to agonise about debt to income ratios, which I personally don’t…”

    Yeah, who cares about how much debt you are taking on in relation to your ability to service that debt.

    And who cares if credit growth is at decade lows!

    • >I find it very odd that Mr Debelle is willing to state publicly that he doesn’t worry about private debt to income ratios or private sector debt dynamics just 3 years out from the GFC.

      Odd? I think it borders on ineptness and incompetence.

      In fact, it is hubris, a common thread amongst neo-classically trained central bankers and economists.

      I also ask why wasn’t the implicit backstop given to banks mentioned in the speech?

      And the talk about sidestepping the Basel requirements (due to the “prudence” of governments not borrowing??) was troubling to say the least.

      Overall, not impressed with the caliber or direction of financial stability with the RBA.

      • Bullhawk still smarting from the fact that the big 4 banks rejected his patented EFM idea 🙂
        He is now firmly in the camp of his non-bank RMBS lender buddies.

    • I agree that there are other factors – along with the size of debt – that matter, but cost of living and interest rates are not fixed and the RBA can always argue that their monetary policy allows them to ease the debt burden.

      But the debt-GDP ratio is only likely to worsen in an economy that slows…as Keen has shown.

      So to ignore that is crazy talk

      Put that quote up in lights, will be akin to GReenspan’s ‘great moderation’

  2. “The crux of my argument today is this: if I am a creditor of a bank, my due diligence should be spent mostly on assessing the asset side of the bank’s balance sheet in determining whether or not I will get repaid in full.”

    What a shame the RBA’s creditors, that is the ones holding the RBA’s credit, which would be you, can’t get ‘paid in full’.

    A bit rich really.

  3. At a glance what he appears to have surprisingly neglected is that the funding profile of a bank should be a reflection of the asset quality that is being funded.

    I am surprised that he seems to speak as though you can assess either on independently of the other. They are not mutually exclusive. An analyst or rating agency should of course look closely at quality assets held, for a variety of reasons, however the going concern ability of that bank to operate as a bank (remain liquid) can only be judged by then asking ‘how are these assets funded?’

    To determine the correct funding profile for a bank, first a Treasurer assess it’s asset liquidity (quality).

    So this is back to front:

    “If a bank is experiencing a problem of illiquidity, the state of its asset portfolio is even more paramount.”

    Illiquidity would be avoided if the focus on the funding composition and profile continued to be paramount and that composition and profile was determined under ‘stress-test’ assumptions by analysing the asset liquidity on the balance sheet (for the third time).

    My more cynical side has a shorter reply: he is trying valiantly to defend an obvious weakness of Australian banks, that the modeled asset liquidity profile on their balance sheet under stress test assumptions may well create a liquidity gap when measured agains the modeled roll-over of unsecured whole sale offshore liabilities that some banks are dependent upon.

  4. I detect some flawed logic here DE. “solvency of any bank first and foremost is a function of the quality and value of its assets”.

    I would have thought it was a function of both assets and liabilities, seeing as how solvency indicates a business’s ability to meet long-term obligations. Banks still need to pay interest on their debt (i.e. customer’s deposits).

    In addition, those asset “values” are also impacted by the debt issued by the banks – debt which the banks pay for by increasing their offshore liabilities or their liabilities to depositors. So trying to separate assets from liabilities for banks is a little erroneous, as you said.

    The other big query is how long would “temporary” liquidity need to be provided for in the event of another credit crunch? If Australian home prices followed the US and UKs, at what point would the RBA realise the asset “values” were not what they had thought and pull the pin on providing liquidity (because the banks are actually insolvent, not just suffering a liquidity issue)? Could they actually do that in the middle of a crisis and make things worse? I doubt it.

  5. “The crux of my argument today is this: if I am a creditor of a bank, my due diligence should be spent mostly on assessing the asset side of the bank’s balance sheet in determining whether or not I will get repaid in full.” – Guy Debelle.

    In addition to my long post above a short real-world example:

    I was working at a bank. As the GFC started to get going and funding markets became extremely squeezed in about October 2007, I had a long conference call with a creditor, the the largest bond funds in the world. They demanded to now two things:

    1. What is our funding profile and composition by currency, product and tenor.

    2. What is our exposure to subprime.

    80% of discourse on that call focused on #1, our funding, which is why I was on the call, to answer the questions.

    I suspect that Mr Debelle is trying to turn back the clock on banking, and odd thing to attempt since it took the massiveness of the GFC to at last get the focus where it needs to be (see my post above).

  6. There is a huge problem with a Central Bank lending money to a distressed bank with a ‘haircut’ of the asset. If the distressed bank goes on to bankruptcy, the government of the day will have to bail out the depositors. Does the Central Bank keep the asset? This scheme only works if the Central Bank, instead of the government, becomes the entity which bail out failed banks.

  7. Disclaimer for higher costs of funding from foreign credit due to greek crisis? A preemptive excuse for our banks to raise rates and for AUS to support them due to property market ‘always rising’ and being a strong asset class?

  8. Speaking of (il)liquidity, money market spreads are still widening. Glenn & Guy might soon be forced to go all ‘easy’.

  9. Ok, one more:

    He seems to crow a little about the liability composition in that chart, the only data provided.

    I see:

    1. Long term debt being neatly substituted for securitisation. Thats fine, and to be expected in the last few years post GFC.

    2. Growth in Domestic Deposits matching the decline in Short Term Debt. Any fall in Short Term Debt _sounds_ good, but what is the term structure of the new Domestic Deposits? I’ll bet weighted average it is very short. He failed to mention that entirely.

    3. But he did manage to mention that “…banks have raised less of this wholesale funding from offshore than has matured over the three of the past four quarters”. If that is such an important point WHY DOESN’T HE PROVIDE ANY DATA???

    The construction of that chart and the manner in which it was presented is disingenuous.

    The more I look at it, the uglier this RBA speech appears. A job badly done.

    • There is a huge difference between ‘short term debt’ and deposits. Unless there is a bank run, deposits may move between banks, but it stays in the domestic banking system. It only disappears when consumer sentiment flips and people starts spending. Short term debt chases after better/safer returns all over the world, and is less reliable.

      • ” but it stays in the domestic banking system”

        Sure, but the term structure on the individual bank’s balance sheet is probably very short. And that spells trouble for that bank in a time of crisis.

        Perhaps you are thinking from a system wide perspective, not an individual bank perspective? In a liquidity crunch perception is everything and even if there is enough money in the system, it locks up and natural lenders no longer want any credit risk at all. So that they stop lending to anyone but the CB. Or they lend only very very short, such as overnight. And so the term structure on individual bank balance sheets gets shorter and shorter with every maturity of a formerly 30-180 day deposit. This happens in unison to all borrowing participants.

        As this happens each individual bank’s forward liquidity risk gets worse, until such a time that they can not take another unit of stress at the margin since their funding structure is now so much shorter than their remaining asset liquidity (the most liquid stuff always goes out the door first in a crisis, big mistake).

        Hypothetically imagine every domestic bank was funded with short term domestic deposits, none from offshore. I agree that the absence of offshore funding is a plus, as you highlighted, but the aggregate short term profile of their domestically sourced liabilities is still a big negative. They have just jumped from one very hot pot to a pot on a slower simmer.

  10. It’s weird how the RBA thinks the personal debt is fine. Without the debt there is no growth, so is that how they view it?? I’d be pretty worried about a AUD 1.04 Trillion national housing debt, and a Federal/State debt of AUD 539Billion when all we’ve got is mining…

    The discount window as I understand it will only be used if the bank is in crisis and needs the funds, and is prepared to pay a premium, so I’m not sure why it’s called a discount window? Also, during the GFC, Westpac, NAB, and CBA borrowed from the FED so why was that, and was it due the the discount window being a premium window, and the funds from the FED were cheaper?

  11. The RBA – let’s not dare call it a conspiracy.

    We know the RBA is NOT a governmental body and the Australian people have no control over it and neither does any politician (supposedly).

    Here is the framework:

    The Reserve Bank of Australia and the Australian constitution

    The Reserve Bank is a foreign ADI. A “foreign ADI” means a body corporate that:

    (a) is a foreign corporation within the meaning of paragraph 51(xx) of the Constitution; and

    (b) is authorised to carry on banking business in a foreign country; and

    (c) has been granted an authority under section 9 to carry on banking business in Australia.

    Prior to 1959 the Commonwealth issued and printed its own money. However, after the 1959 Reserve Bank Act, the Reserve Bank was established as Australia’s Central Bank and banknote issuing authority and as a stand alone independent foreign ADI.

    The RBA controls the issuance of currency through the selling of government bonds and in turn supplies the proceeds to the Commonwealth at interest. So instead of the Commonwealth printing its own money, we have a foreign controlled corporation printing our money and lending it to the Commonwealth.

    “RESERVE BANK ACT 1959 – SECT 77 Guarantee by Commonwealth

    “The Commonwealth is responsible for the payment of all moneys due by the Bank”


    “RESERVE BANK ACT 1959 – SECT 27 Bank to be the banker for the Commonwealth

    The Bank shall, in so far as the Commonwealth requires it to do so, act as banker and financial agent of the Commonwealth” (Again, the reserve bank is the Commonwealth’s banker and lender and the Commonwealth is therefore obligated to repay the money back to the Bank!)


    The act below conveys how foreign corporations (if appointed) can exercise power of attorney over the Reserve Bank of Australia:

    RESERVE BANK ACT 1959 – SECT 76 Attorney of Bank

    The Bank may, by instrument under its seal, appoint a person (whether in Australia or in a place beyond Australia) to be its attorney and a person so appointed may, subject to the instrument, do any act or execute any power or function which he or she is authorized by the instrument to do or execute.


    Hmmm, foreign agents in control of the Reserve Bank of Australia?

    RESERVE BANK ACT 1959 – SECT 75 Agents etc.

    In the exercise of its powers and the performance of its functions, the Bank may:

    (a) Establish branches and agencies at such places, whether within or beyond Australia, as the Bank thinks fit;

    (b) Arrange with a person to act as agent of the Bank in any place, whether within or beyond Australia; and

    (c) Act as the agent of an ADI carrying on business within or beyond Australia.

    Gotta ask the question – could they be compromised?

    “Give me control of a nation’s money supply and I care not who makes the laws.” Mayer Amschel Bauer Rothschild (1744 –1812) Father of Nathan Mayer de Rothschild.

      • “I hope there are no hidden issues in this”

        Indeed, in the back of your mind you question if the decisions made are truly independent and not influenced by an unseen hand.

        In reference to gold, I’ve heard similar by geologists, but it all comes down to extraction costs.

        I’ve also read a few years ago about large undisclosed gold hoardings by generations of royalty, financial elites and religious institutions that aren’t factored into world estimations.

  12. Power and the money,Money and the power
    more after More ,Honor after sour
    Everybody’s running but half of them are cooking…
    and this is what goes down in the kitchen..of
    Cooking, value’s n Currency’s

    They say I got to learn,as everybody here is to teach me..But
    If I can’t understand this,how can it breach me..
    I guess it can
    I guess it will
    I guess I’ll Front
    That’s why we know our lives are stuck..
    Seems reconstructing for lack of use..Has got me Luck..

    Tell me why are we so Blind to see
    The one’s they flirt are you and me….

    A short wrap’ from a ‘Gangster’s Paradise’…(chorus) and just a few things changed

    Get well all
    and thanks for all the backup reads and comments.. Cheers JR

    • Yeah,it melts to a puddle pretty quick
      and tries to evaporate in a smile..cheers

      I see the ‘Gasland” Doc is on SBS QLD…JR

  13. The RBA is trying to make Australia look like something it is not. The media, govt and RBA are all doing the best they can to make Australia look like a gem. The investors and others that really do their homework will find that this is not the case. I have people from overseas asking me about investing in Australia and I tell them to do their homework. They do and realize maybe they should do something else. There are alot of underlying problems that none of these above will ever admit. This goes to show the arrogance of the Aussie govt, RBA and media. This arrogance is what brought down everyone else and while be the same for Australia.

  14. Yes, the RBA is talking it’s book terribly.

    They have now drawn attention to the one flaw that they arrogantly tried to dismiss. They have told everyone else that they are wrong, including the most sophisticated liquidity managers on the globe (banks and CB’s alike). They have thrown Moral Hazard out the window. They are busy undoing a lot of progress and diligent work in the field of prudent liquidity risk management. The arrogance and wrong headedness is stunning, and that speech is making them a laughing stock amongst leaders in this field. But sadly, it is not so funny: they have taken a dangerous step with that self-interest attempt to steer the game. They should be ashamed of themselves for being so intellectually dishonest.