Clearly the mosquitoes nipping at APRA management – that is, MB and Chris Joye – have caused a little itching. We have been calling for APRA to engage in an outreach program to manage reform of itself from what is currently a broken system defined by institutional confusion, opacity, diffused responsibility and industry capture to one where rules and responsibilities are clearly understood and public accountability possible. Today we get our response at, of all places, Boss Magazine:
The man responsible for the stability of Australia’s banks was aghast when the very institutions that brought the financial system to the precipice were shamelessly ducking and weaving to avoid responsibility for the global financial crisis.
Wayne Byres played a central role cleaning up the mess of the GFC as secretary-general of the Basel Committee on Banking Supervision from 2011 to 2014. The first Australian appointed to the prestigious role, he was thrust into a whirlpool of regulatory wrangling as dozens of big bank executives travelled to Switzerland to argue against the application of new rules.
To the regulators, it looked as if the banks were continuing to put their own desire for profit over the interests of their customers. Their performance hit a raw nerve with Byres.
“One thing I observed was how much even sensible regulation got resisted and how much time and effort and brain power the industry put in to arbitraging rules,” Byres tells BOSS. “It struck me there was something at odds with the mindset. Financial institutions say they are here to serve customers and the community and regulators are here to serve the community and make sure customers are protected.
“But there seemed to be a terrible battle and I thought there were aspects where bank culture and mindset seemed to be at odds with the concept of what is the right thing for the community that we are all meant to be serving.”
As the chairman of the Australian Prudential Regulation Authority since 2014, Byres’ belief that among the causes of the financial crisis “were failings in the ways institutions managed themselves, the way they governed themselves, their culture and the way they structured their incentive arrangements” is now guiding his work.
He’ll be damned if he is going to let the same thing happen in Australia on his watch, a mission made even more complicated by the rampant growth in property prices that’s been unleashed in this era of unprecedented low interest rates.
What a hero is our Wayne! Neh, super hero! The calling card of Boss journalism is the notion of the CEO ubermensch, supermen in super-suits, governing the lesser and doing it with great magnanimity as underpaid billionaires. The sole purpose of Boss Magazine is to kiss arse and in return receive an advertising endowment from the flattered.
Frankly, it is beneath APRA to be involved in it. Given the circumstances of the desperate need for APRA reform it’s much worse, it’s cynical. Calls for APRA outreach have been met not with intellectual engagement but with a sickly avalanche of dripping propaganda. At the best of times it’s almost impossible for real journalists to reach APRA at all and, those that used to get access, are being carved out. Yet here we have intimate access, carefully crafted, fluffed and plumped. It goes on:
…Those who have worked with him over the years reckon Byres is up to the challenge. Bill Coen, an American who replaced Byres as secretary-general at the Basel committee in 2014 and worked closely with Byres during his three-year tenure, says his leadership and management style is defined by composure and strategic thinking. He describes Byres as “always calm, always keeping sight of the big picture and always thinking a step or two ahead”.
“As a manager and leader, Wayne was abundantly patient and willing to look at a problem from different angles, while always having a clear view of the direction he wanted to go,” Coen says.
…“Much of APRA’s success depends on entities giving us full access to information and working closely and co-operatively with us once issues are identified,” Byres says. Banks should think of APRA as a doctor rather than a policeman. He encourages them “to maintain a healthy lifestyle, rather than have to deal with [APRA] in intensive care or, heaven forbid, in the morgue, when it is too late”.
Note how success is assumed not earned in the piece. Of course, Wayne Byers is up to it. He’s a super man with super analogies to boot! Whether the argument put forth makes any sense is besides the point even if, in this case, the regulator as doctor analogy is dangerously reminiscent of Alan Greenspan’s dictum of never working against a bubble in advance, of just cleaning up afterwards, of treating a disease once its manifest.
The obsequiousness goes on:
APRA has had an impact in reining in the banks’ scramble to sell mortgages to property investors, a continuing challenge given continued record low interest rates. In a policy coordinated by the Council of Financial Regulators, which includes the RBA, APRA, ASIC and Treasury, APRA imposed caps on the growth rate of property investor loans in December 2014.
The policy has been effective: banks are showing loan growth well below the 10 per cent cap as investor lending has dipped, with the slack taken up by owner-occupiers. This gave the RBA confidence to cut official interest rates in May.
“Experienced supervisors cost money year in, year out. But we are firmly of the view, and the track record in this country backs this up, that supervision is the more cost-effective way to achieve good prudential outcomes rather than writing lots more rules.”
Byres says during his time in Switzerland he was always alert to ideas to bring back to Australia. “But if I looked around the world and asked, ‘Is there clearly a model that has worked better than ours and would that be worth trying here?’ I don’t see one.”
Cripes, where are the alternative views? APRA was three years late on the investor lending bubble. More to the point, its ‘supervision over rules’ model has inherent problems, some structural and some cyclical:
- it leaves the regulator operating in a very opaque environment with no accountability;
- as such it is exposed to great risk of regulatory capture, in which the regulated have undue influence over the regulator;
- at present, APRA is operating as the defacto central bank yet we know not what its rules of engagement are, throwing up wholesale confusion about Australian monetary management and
- ensuring that responsibility for the levers that determine the price of our currency, our goods, our wages, our very homes exist in a thick soup of bureaucratic arse-covering.
In essence, rather than address any of these, Wayne Byers has summoned a pack of journalistic makeup artists.
Given how much the nation is counting on you, Mr Byers, that is a very poor response.
