Australian banks

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.

21

Government drops support for RMBS market

By Leith van Onselen In September 2008, only days after the Collapse of Lehmann Brothers in the US (marking the beginning of the Global Financial Crisis), the Australian Treasurer, Wayne Swan, directed the Australian Office of Financial Management (AOFM), the Australian Treasury’s financing arm, to commence purchasing residential mortgage-backed securities (RMBS) from smaller (mostly non-bank)

1

APRA invites banks to expose their deepest secret

APRA released a discussion paper on Basel III reforms today and it included the following tid bit: In addition, APRA accepts that ADIs may wish to disclose further information on regulatory capital ratios. It therefore proposes to provide anaddendum that compares capital ratios under APRA’s requirements (after applying national discretions) and under Basel III rules

5

Bank West’s “catastrophic” expansion

The wild west of Australia’s pre-GFC banking expansion is on display today at Banking Day: HBOS Australia and Bankwest incurred lending losses over the four years to 2011 equal to more than one fifth of their loans, a review by a UK parliamentary committee into HBOS, the bank’s then owner, found. The UK committee released

17

How to fix the CLF

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

21

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

21

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

17

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

6

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

19

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

10

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’

29

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

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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

17

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

17

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

0

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

5

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

12

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