Interests swarm Murray Inquiry

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Banking Day today briefly lists the positions taken up by various interests around the Murray Inquiry:

…The Customer Owned Banking Association aired a long running gripe.

“While ‘systemic risk’ is covered, there is no explicit reference to the massive hidden subsidy the Big Four banks receive in the form of an implicit government guarantee,” Louise Petschler, chief executive of COBA, said.

…Other long-standing irritants that mutual ADIs want addressed include the “culture of regulators and its impact on competition, consumer choice and diversity of business models…more effective disclosure about ‘shadow banking’ institutions and the proposed Financial Stability Fund levy.”

Steven Munchenberg, chief executive of the Australian Bankers Association, pushed a couple of themes: “ensuring regulatory barriers don’t impede innovation driven by customers’ ever-changing needs”; and “ensuring there’s a level regulatory playing field for all banks.”

And from Murray himself who is the king pin interest given his history of helping create many of problems that the inquiry was conceived to address:

Responding to concerns that he is too close to the banking sector, Mr Murray said he had a broad understanding of all the components of the financial system and the backing of the federal government, which could use his recommendations to overhaul regulation of all financial services, which makes up 10.5 per cent of the economy and a third of the share market.

“Given that this is a broad review where all the parts are interdependent, do you want someone who doesn’t understand it?” he said. “The Treasurer is obviously confident [in me].

“I’ve covered banking, aspects of investment banking, asset management, superannuation, general insurance, life insurance and retail, wholesale and international banking,” he said.

Last month ANZ Banking Group chief executive Mike Smith suggested the inquiry’s credibility could be put into question if it was run by people with links to banks. “My only view is that they have to have credibility across the board in terms of the community, and therefore can you really inject that credibility if it is headed by a former banker?

The conflict is not just Murray being a banker. It is that he was a key banking executive in the period that oversaw the dramatic expansion of offshore borrowings that led to the rupturing of the Wallis financial architecture in the GFC. While he may not be personally responsible for the systemic shifts that led into the crisis, Murray played his part in creating the financial sector vulnerabilities and can’t therefore be an objectively independent arbiter of how they should be addressed.  I argued exactly the same thing about Ian Macfarlane when he was mooted to run the inquiry.

There are many others that are independent and understand all of the issues just fine.

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Comments

  1. David

    “The conflict is not just Murray being a banker. It is that he was a key banking executive in the period that oversaw the dramatic expansion of offshore borrowings that led to the rupturing of the Wallis financial architecture in the GFC.”

    (snip)

    It is that he was a key banking executive in the period in which banks bid up the price of housing, creating three things:
    1) increasing unaffordability of housing
    2) over two decades, a bloating of bank balance sheets, making THEM ‘too big to fail’
    3) a funding dependency on interbank borrowing, as housing prices were bid up faster than the organic growth of deposits in the system

    FIXED!

  2. Steven Munchenberg, chief executive of the Australian Bankers Association, pushed a couple of themes: “ensuring regulatory barriers don’t impede innovation driven by customers’ ever-changing needs”; and “ensuring there’s a level regulatory playing field for all banks.”

    Wow!! There is enough spin in there that 3d1k couldn’t possibly generate in his lifetime.

    Let me unpack it a little bit: Impede innovation?? Was there regulations that impeded the development of the ATM or internet banking? or real time settlements?

    What exactly does he mean by innovation? Does he mean sub-prime mortgages? CDOs? CDSs? 100% LVR mortgages? payday lending with 1000% interest rates?

  3. Disclosure: I have a minor business relationship with DM.

    He’s been appointed and I’m sure will abide by the terms of reference as independently and as best he can. His statements over the last few years indicate that he is not in the pocket of the current crop of banksters, although he’s more than aware of how they operate and their rent seeking behaviour.

    For mine, anyone that Mike Smith is against, I’m for

    • I appreciate your disclosure Deep T.

      You have a personal view of this man, & I do hope for the Australian peoples sake that you are right, & that he can be completely objective.

      Someone from ‘outside’ wouldn’t have any baggage (or suspicion of) whatsoever to carry though.

      Presuming he goes about this job unbiassed & unfettered, it’ll come down to those Terms of Reference you mention…. & to me, therein lies the real snake in the grass! And where the other snakes will congregate to ensure their preferred outcomes.

      We’ve all seen enough of these over the years to know how those terms of reference are framed. What they shine the light on, & what they desperately avoid. It will be these that will determine any recommendations. Then of course they still have to be enacted upon after that……..

      Why do I get the feeling that there will be a bit of trimming around the edges after the inquiry to make it look like ‘everythings fixed’. When the real ‘fix’ will be in the writing of the terms of reference.

  4. Think Joe Hockey has made a mistake here. Joe wants to increase competition and decrease reliance on big 4. Undoubtedly.

    There would have been far better candidates than an ex-big 4 CEO, who probably still has a huge equity interest in CBA ?

    Maybe someone who has been a recent bigwig at the ACCC would have been better.

    • The same ACCC that let CBA proceed with the takeover of BankWest, Count Financial, Aussie Home Loans, InvestorWeb etc in the past few years? Yes, they’d do a much better job