Hoocoodanode! At Domain:
One of Australia’s top bankers has warned against using unconventional monetary policy in an attempt to boost the domestic economy, saying it could undermine international investor confidence and have a precipitous impact on bank profit margins.
The chief executive of Westpac’s institutional bank, Lyn Cobley, also said she did not think even cheaper credit would spark higher demand from big businesses, and it was “obvious” the government could use the budget more actively to stimulate growth.
…“As rates continue to drop, so do our margins, and it could be precipitous. We worry about the impact on our profitability and therefore the impact on our rating. And there’s little wonder that that European banking system, and some of the others, have been so precarious for so long,” Ms Cobley said during a panel discussion at an Australian Business Economists lunch in Sydney.
Quite right. QE is all about flattening the yield curve and there is nothing that hurts a borrow short, lend long business more.
But we’re out of ammo and some kind of money printing is inevitable as lowflation and secular stagnation eat the banks anyway. It would be preferable to jump over QE and go straight to helicopter money but the Lunatic RBA does not have that in it.
QE it is. Next year some time. It will at least come with the benefits of a lower currency and falling banks plus rising tradables, which is all a part of the economic restructuring that awaits.
So yeh, sell banks.