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.
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
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
Find below a very good speech today given by RBA Asssitant Governor Malcolm Edey on the history of pre and post GFC banks and lending. I could punch a few holes in it but in toto it is a very thoughtful dissertation on where we’ve been, where we are and where we’re going. Recommended reading.
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’
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
The Greens get a big tick of approval this morning: The Australian Greens have proposed a tax on the big four banks for government insurance that would raise up to an extra $11 billion over the next four years. The minor party proposes a levy of 0.2 per cent on all bank assets above $100
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
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
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
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.
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
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
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
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
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
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
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
