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
Primary Section
MacroBusiness covers Australian banks from the perspective of their macro-economic role, as political economy actors, as investment propositions and in terms of financial stability and capital adequacy. Australian banks have played a crucial role in inflating the Australian property bubble, exist within an utterly privileged position as “too big to fail” institutions and operate within a deeply distorted financial architecture that has Australian tax payers well and truly on the hook in the event of trouble. MacroBusiness seeks to define this role for investors as well as change it in the name of the Australian national interest.
What price bank liquidity?
By Leith van Onselen Early last month, the AFR’s Chris Joye wrote a timely article questioning the merits of, and processes around, the RBA’s Committed Liquidity Facility (CLF) for Australia’s banks: The Reserve Bank of Australia’s unique Committed Liquidity Facility – a little-known, taxpayer-backed “line of credit” to help banks overcome solvency crises – creates
Short memories fuel Mac Bank mortgage romp
The AFR has an interesting story today about Macquarie Bank seeking to grab its share of the Australian mortgage magic pudding: Macquarie Bank has posted an astonishing 55 per cent growth in mortgages to $6.2 billion over the past six months as it seeks to take advantage of big profit margins on home loans and ramp
Hockey deleveraging
Talking to the ABC this morning, incoming Treasurer Jo Hockey said: “I, like others, have taken advantage of the lower interest rates to try to pay down the principal. But I know, like everyone else, that that’s just a temporary feature.” Well, Joe, if you continue to pay your mortgage ahead of schedule it won’t be
What’s got our financial regulators spooked?
If I could go long regulator caution right now I’d be getting rich. And no, I do not mean caution as applied to the regulated. I mean caution as it applies to regulatory reform. This week has seen reactionary speeches from senior RBA and APRA officials insisting that current financial regulations are more than adequate
Westpac still hot for deposits
After the RBA’s irresponsible exhortation to the banks to ramp up wholesale borrowing last week it is something a relief to see Westpac today declare that deposits will remain a key focus. From the AFR, according to senior executive Brian Hartzer: Mr Hartzer said on Tuesday that the bank was prioritising growing deposits and strengthening
APRA slams door on bank capital returns
Following Friday’s dreadful speech from APRA’s Charles Littrell, APRA Chairman John Laker delivered better in addressing liquidity requirements and any prospect of bank capital return. On the first Laker said: “We have already been offered advice that APRA should adopt the revisions without demur, although it is not always clear that commentators have fully understood
APRA swings wildly at macroprudential
Find below a disappointing speech this afternoon from APRA’s Executive General Manager, Charles Littrell, dedicating much time and space to backslapping APRA’s discretionary approach to financial stability and giving macroprudential reform short shrift. We know that APRA did a poor job in the years before the GFC because without the wholesale intervention of government into the
Norway goes macroprudential
The RBA has stated its position on macroprudential controls thusly: We also must, of course, heed the lesson that, whatever the framework, the practice of financial supervision matters a great deal. Speaking of supervisory tools, these days it is, of course, considered correct to mention that there are other means of ‘leaning against the wind’
The banking man’s paradise
Last week’s eminently sensible suggestion by the Greens that Australian banks should pay fees to the Australian tax-payer for the policies that protect them has again illustrated the parlous state of Australia’s political economy. First of all, why is it only the Greens that have suggested it? The government immediately reiterated its abdication on the
What is the answer to bank liquidity?
Chris Joye has a good piece today examining the shortcomings of the RBA’s Committed Liquidity Facility (CLF) for banks (cash for coconunts as we call it at MB): The Reserve Bank of Australia’s unique Committed Liquidity Facility – a little-known, taxpayer-backed “line of credit” to help banks overcome solvency crises – creates as many problems
Oz taxpayers at risk in NZ property bust?
Looks like I mistook tone for substance in my recent assessment that S&P was getting more bullish on Australia. Following the recent release of the sovereign report, I contacted former Australian sovereign analyst Kyran Curry and he confirmed that S&P’s stern outlook for Australia had not changed. That is obvious today with the release of
Deposit growth is falling fast
This morning APRA released its January banking statistics and it is no surprise to see the downtrend in deposit growth being entrenched. In January deposits grew just 0.23%: Year on year growth is falling fast, down now to 7.3%: Total deposits are leveling off: This will be the combination of the income blow from the
APRA spooked by declining lending standards
Regular readers will know that MB has been arguing for new macroprudential rules – that is, hard and fast controls on lending such as LVRs – to be used in monetary policy management. The reason why is to ensure that as this business cycle develops banks do not return to their old dodgy lending practices.
We must bail-in the creditors
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
Bank funding costs poised to end European crisis?
From Banking Day comes the news that on Friday: …Westpac priced the Series 2013-1 WST Trust. The A$1.9 billion class A tranche, with a weighted average life of three years, was priced at 85 basis pointed over the one-month bank bill swap rate. Pricing on the $71 million class B tranche and the $97 class
APRA gets it right on RMBS liquidity
From the AFR, APRA head John Laker last night snuffed out hopes that RMBS may be included in an expanded basket of qualifying assets for Basel III liquidity requirements for banks: “The discretion to add additional assets is qualified by the fact that these assets … must have a proven record of a reliable source
Much ado about nothing in out-of-cycle rate cuts
It is not always easy to determine bank funding costs. They’re complex. The AFR is very excited today about the prospect of out-of-cycle rate cuts from major banks: “Potentially, we could see out-of-cycle interest rate cuts, but not in the near, near future,” Morningstar bank analyst David Ellis said. “It depends on how offshore, wholesale funding
Genworth LMI claims still “elevated”
From Banking Day: Claim levels on the mortgage insurer Genworth Financial remain “elevated”, the company said yesterday. Claims by insured home-loan funders were A$71 million in the December 2012 quarter, down from $81 million in the September quarter. Claim hot-spots remain loans advanced to borrowers in Queensland and also to small business owners and the
Europe is not done for Australian banks
One of the indicators I watch closely is the CDS prices for major banks. This is the cost to insure a bond issued by a bank and is a guide therefore to the robustness or otherwise of underlying credit markets. Here is the long term chart for CBA, JPM and ING. I have chosen these three
Moody’s downgrades LMIs
From Moody’s: Sydney, February 04, 2013 — Moody’s Investors Service has today announced the conclusion of its review of the Australian lenders’ mortgage insurance (LMI) sector, and downgraded the ratings of three LMI companies. The actions are: – Genworth Financial Mortgage Insurance Pty Limited’s (Genworth Australia) insurance financial strength rating (IFSR) was downgraded to A3 from A1; – Genworth Financial