Peter Costello today:
When you talk about corporate Australia, when you talk about the Business Council, most people think you’re talking about the banks.
The royal commission is affecting the reputation of all of corporate Australia.
[banks are in] more trouble now than they were in the financial crisis.
The financial system was essentially designed to make sure the system was strong in a time of stress, and it was.
I think in the aftermath of that, some of our bankers started to believe it was all due to their genius, they should take the rewards and they took their eye off the customer.
Some of these boards became complacent.
To me one of the biggest risks facing a bank would be regulatory failure. Because if you fail to adhere to the law, not only are you letting your customer down but as we see now you face immense reputational risk.
Who was keeping their eye on that risk in these banks? Who was?
I think banks will have to be more careful in assessing the credit worthiness of customers and some people will find it harder to get loans.
Correct. So, what is needed to fix it? If it’s a structural problem arising from government sponsorship and the arrogance of moral hazard then it needs a structural fix.
That could be the permanent revocation of the guarantees. A Tobin Tax on too-big-to-fail banks that slows them down and allows others to grow. Or even Bob Katter’s local version of Glass-Steagall.
Not much hope of these from the intellectual gnat called Scott Morrison.
