Jeez, the Son of Wallis inquiry is going to be barrel of laughs if this morning is any guide. From Banking Day:
When Ian Harper sat on the Financial System (Wallis) Inquiry committee in 1996 the deregulatory push of the 1980s was still driving change. Things have changed since then.Harper, who is a partner in Deloitte Access Economics, said: “There is no longer the acceptance that the market can have its head. We now agree that markets should be regulated.””However, some regulatory interventions are not fit for purpose. We have to ask whether we should have no risk in our financial system or have a system that is designed to take sensible risk.”The stability we have been trying to achieve since the GFC is at the cost of innovation. It is a high cost…We see opportunities for prosperity through financial services. There is demand from the region, and we have a competitive advantage.””
With respect to Mr Harper, what competitive advantage? We have mandated flows of capital into a sector that has barely competed in its silver-spoon fed life. AMP is a classic example. How can you bugger up a business that get’s fed capital by law?
I agree with Mr Harper’s observation that the banks don’t carry enough risk. The post-GFC banking system has no risk in it at all. It’s retail and wholesale liabilities are guaranteed, it’s largest collateral class is underwritten by federal policy, its liquidity position is guaranteed at virtually no cost. It’s profits are insured by a housing-obsessed central bank. But rather than proceed to point C – that we need innovation to let the bank’s expand – let’s start at point A. What kind of banks will serve Australia’s interests? What kind of banks will build the economy we will need. What kind of regime will provide for appropriate risk taking and compensation for tax-payer support?
No, says business interests commentator, Jennifer Hewitt:
The inquiry’s very broad terms of reference are expected to be released within a few weeks. A draft is already circulating. Such a wide brief and the fact that Treasurer Joe Hockey has plenty of other priorities means the review’s direction will be even more heavily influenced by the choice of chairman – expected by the industry to be David Murray.
…It’s already clear that despite growth in domestic deposits, a capital-hungry country like Australia won’t lose its reliance on offshore funding.
But the increasing temptation domestically is also to look at superannuation as the answer to everything from funding infrastructure to providing credit to small business. Determining the right balance between making the highest returns for individuals funding retirement and funding the national interest in a country short of capital is always going to be difficult. The inquiry is likely to recommend ways to make this more feasible.
John Brogden, from the Financial Services Council, particularly wants the inquiry to look at how to expand financial services as an export industry for Australia, especially in wealth management. “While we will never rival Singapore or Hong Kong as a financial services centre, we can leverage our world-leading funds management system,” he says.
So, the inquiry is to be run unquestioningly by one of the guys most responsible for driving Australian banking into public arms, the current account deficit and offshore funding are as certain as death and taxes and we should gratefully accept the advice of the funds management lobby. Remind me again why we are having this inquiry?
