Australia you’ve been conned, hoodwinked by APRA to ensure that the too big to fail taxpayer guarantee of Mega Bank (CBA, NAB, ANZ and WBC) continues unabated. Another example of the game of mates, where APRA gains by pointing to a job well done on system stability, even while the risk rests squarely on the
APRA’s Wayne Byers gave a speech on 5 April which sought to set the agenda for the future state of the bank capital in Australia. Whilst clearly the agenda is that bank capital is to increase, I found the speech misleading on the current state of major bank capital and therefore grossly misleads the market
To recap, my last post was about my tribe of children being disillusioned. They all were very down on the future: the overblown housing market; job and earning prospects are crap to non-existent; foreigners are buying the country unabated; over-paid and corrupt bankers; and the appalling choices of leaders in politics everywhere. Whilst they haven’t
Make no mistake, the biggest issue being addressed right now is wealth inequity across society, classes of workers and generations. The rise and rise of non-mainstream populists is but a step, a reaction. The tsunami for change is rolling and won’t stop until it breaks. I have eight children and as the youngest has just
2017 will bring financial conditions in Australian mortgage and housing markets never seen before. The rules of the game have changed and so will the results. The future of the mortgage and housing markets in 2017 may appear uncertain but as we have now entered an era of rising interest rates in the US, a
Many things that occur in society defy rational or logical explanation. Society does not behave like the universe where science continues to unravel the workings through theory, experiment and testing. The universe is rationally predictable through the laws of science. Society or people are not, as collectives of humans influence their own outcome and that
Official interest rates are heading negative everywhere that public and private debt levels are at record highs on every measure. Australia fits squarely at the top of the pile. No doubt influencing Australia’s central bank, the RBA, to reduce the official cash rate a further 25bps in August. Whilst predictable the explanation in the RBA
Let’s close one case of deception and move to the next. The case for closure, I am pleased to say, is that APRA has finally dealt the death knell to the misleading reporting of the Majors, aka MegaBank, as to their “real” levels of capital. The new deception however is no less worrying with our
Luci Ellis, RBA’s Head of the Financial Stability Department gave a speech last Friday, Reforming and Financing the Post Crisis Future . The hairs on the back of my neck picked up when I read the following: APRA set the local rules to require banks using their own models to hold more capital against housing mortgages
Sighhhh. I’ve written about this in detail a few years ago but nothing has changed and the deceit continues. All of Mega Bank’s divisions continue to present to the market deceptive figures about the strength of their balance sheets and the amount of capital Mega Bank holds compared to banks in other parts of the
In my last post, I pointed out the gross inadequacy of APRA’s treatment of Mega Bank as Australia’s D-SIB (Domestic Systemically Important Banks). In essence APRA have stated that although Mega Bank needs to carry a meagre 1% extra capital because it’s a D-SIB, because of other spurious reasons Mega Bank does not actually need
I’ve come out of my self imposed exile, to point out the howler of bank regulation of 2013. There’s been no or little main stream press on this and no comment that I could find and little wonder. APRA saw fit to release this Information Paper on 23 December 2013. This paper is very important
There’s been much recent discussion on MB and from contributors to this blog on the merits of the RBA’s conditional liquidity facility (“CLF”), as well as more broadly recently following a series of articles by Chris Joye at the AFR. I’d like to try and make clear the importance of the CLF and the interconnectedness
Recently I’ve read and heard opinions expressed that securitisation, particularly residential mortgage backed securities (“RMBS”), are no longer relevant to the Australian financial system. Nothing could be further from the truth. RMBS is central to maintaining the solvency and liquidity of all banks/ADIs in Australia and cometh the offshore credit squeeze are likely to be
The RBA governor’s speech this week certainly stirred up a few pieces of controversy, not least has been pointed out by MB’s Houses & Holes and Unconventional Economist when Mr Stevens suggested the pointlessness of macroprudential policy: We need, however, to approach such measures with our eyes open. Macroprudential tools will have their place. But
Sleeping with the enemy can be a very dirty but necessary task in order to make meaningful change. But that should not mean going easy. The headlines around APRA’s recent bank stress testing and financial forecasts reflect a common view that essentially all’s fine, the future will reflect the past and a plan is in place
Whilst the RBA and politicians dance around addressing the strength of the Australian dollar, crushing many productive sectors of the economy, APRA and Mega Bank use policies that pass massive risk to the taxpayer and inflate the level of the AUD. How so? The traditional and “official” view is that if a financial institution or
The life of a banking system analyst can be lonely indeed. One tends to both offend and support all various interests at different times. I’ve been accused on MB of being a supporter of both Karl Marx and Ayn Rand whilst being a rent seeker for the non-Mega Bank Australian ADIs. I can honestly say I’m not
The Basel committee has been busy and has finally released a consultative document, “A framework for dealing with domestic systemically important banks” (D-SIBS). This document sets out recommendations to local regulators (APRA in Australia’s case) on how local banks, which carry the risk that if they fail, it may cause systemic failure, should be regulated for
The variability within the Australian economy seems to be a mystery to some and simple to others but I doubt many have considered the “deposit dilemma”. In the following paragraphs I am going to outline an hypothesis about how Mega Bank (the big four) has a sleeper hold on the Australian economy due to the
The opinions of a few people in a small number of credit rating agencies (CRAs) dictate the operations of a significant part of the global debt markets. As debt markets rule the financial markets, this is a very powerful position and comes with great responsibility. Yet CRAs are free to provide whatever opinion they decide.
Now that all the hype over the RBA’s rate cut and Mega Bank’s reduction in mortgage rates has died down. Its time to recap on the only campaign in Australian media focused on Mega Bank’s balance sheet and urging bankers to follow regulatory rules and responsibilities. Whatever situation Mega Bank may be faced with politically
It is with some vindication that I am able to inform MB readers of a forthcoming investigation by the Basel Committee on the progress of the implementation of Basel III reforms on a country by country basis. The investigation will extend to include the calculation of risk-weighted assets in both the banking book and the
APRA has acted and the game is changing for Mega Bank. I’ve posted on this blog many times that banking and capital regulation should be about accountability and method disclosure, not just a set of prescriptive rules. On March 30 APRA released its draft prudential standards on the Basel III initiatives and amendments to existing
The next installment of working through the detail on how Mega Bank operates and is regulated is how covered bonds work. I have posted on this topic but its well worth revisiting and adding solutions for how both APRA and the RBA both could minimize a very risky situation. Why are they being issued and
