Has Murray hit the banks?

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As I noted this morning, a little. Credit Suisse sees what I did, firmer capital charges:

We see scope for mortgage risk weight floors to be introduced (negative for the majors, particularly CBA and WBC) but also scope for some small positives for the mortgage businesses of the regionals (e.g. expedited advanced accreditation, government sponsorship of RMBS markets).

  • The report arguably promotes a larger business financing market (especially for SMEs), both in intermediated markets (give lenders better access to information about the financial position of borrowers) and non-intermediated markets (create a larger listed ‘vanilla’ corporate bond market). We see this particularly favouring business orientated banks (NAB) but also improving SME credit risk assessment (lower SME write-offs over time).
  • We see the report’s concerns regarding systemically important institutions being perceived as “too big to fail” as potentially (but not unequivocally) negative for the majors if say, an additional D-SIB capital charge is introduced, but we see this as an unlikely ultimate outcome (the report sees Australian bank equity Tier 1 capital ratios as around the middle of the range relative to other countries).
  • The report appears biased towards softening the superannuation fund portability rule (we see this as potentially opening up a larger market for funding long duration assets / infrastructure) and developing the retirement phase of superannuation / income stream products with longevity risk protection (we see this potentially creating a larger overall market for annuity products).
  • The report appears biased towards prohibiting direct leverage in superannuation funds. We see this as a small negative for long-term system credit growth (particularly mortgages) inasmuch as a large pool of collateral might now not be available for undertaking levered investments.
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