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SENATE Notes 3

Posted by on in Bankers A Law Unto Themselves
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ABA CEO, Steven Munchenberg, plus Policy Director and Director of Statistics

ABA: Intro asking the senate to take their time before more regulations

Senate: "Impact of the cost of GFC on cost of funds.  Anything govt can do to assist?

ABA: "Covered bonds help banks raise money.  Very strong savings rates in Aust right now.  Want to see how can use super deposits and bring into banking system to give better access to consumers for credit."

Senate: "you said the banks are suffering regulation fatigue. We are looking at international changes and how they are impacting on Australia.  Are we paying the price for not making changes earlier?"

ABA: "Regulated at a global level and increasingly by the US congress.  RBA and APRA have done a good job in balancing the regulations in Australia.  APRA feels it is important to move quickly.What the banking system is really about is managing risk - lending and paying back.  Cannot remove risk from the banking system, will impact banks willingness to lend, i.e. like entrepreneurial loans"

Senate: "Concerns about APRA's moves?"

ABA: "Balance related to Basel III compliance."

Senate: "If that happens quickly, won't that be better for the banks?"

ABA: "Well known around the world that AUSt banks are well capitalised and got thru the GFC unscathed, and Aust is seen as a good source of money."

Senate: "US congress's impact... is that because they are looking at all their interests... How are these laws impacting on us?"

ABA: "Their major banks are connected here through international business.  They then have quite strong clauses and this brings in problems IE recent anti-tax avoidance laws, requires us to identify US citizens here for the IRS.  It is problematic for us. Don't forget we are also dealing with all the US laws and the global regulations "

Senate: "Discussion earlier and point made that major banks are purchasing money from overseas at a reduced rate to lend here.  Paper today that range of caused up americian companies buying millions of Australian bonds because seen as safe haven.  In that context where foreign companions, corporates and countries are investing here, and your members are investing heavily overseas, are they price setters or price takers in that scenario."

ABA: "You can get a mortgage in australia cheaper than the spa inch govt can get money.  we pay about 2% more for deposits than pre GFC. Still paying a risk premium and also have exposure limits. Aust still most attractive to park your money but still some limits."

Senate: " so margin of 1% that banks have to pay, is that basically down to the risk premium."

ABA: "Yes"

Senate: "Why is there this distinction between the wholesale providers and the banks? Because these countries are buying so much of our money, and it is saying that Aust paper (currency) is overpriced by approx 10-15%. The risk premium for Govt bonds in australia is a low risk."

ABA: "Ultimately you have to look at the margins, and even if they are close to 0% like in the USA that does not mean that the mortgages are going to be that low."

Senate: "mentioned Spain a few times, Why?"

ABA: "Spain is the current concern of vulnerability at the moment. Spain is the week link.  House of cards in a hurricane.  Unsustainable but not sure when going to collapse."

Senate: "What was Spains position before GFC?"

ABA: "were able to access money more cheaply, and they have expiated their opportunity

SENATE: "That is a completely wrong analysis. Spain had a fiscal surplus., so it was a banking problem, not a fiscal problem.  You obviously know nothing about the situation in spain and greece.  Lets hope your other comments 

ABA: "I accept your corrections"

Senate: "If you can;t get it right.  The banking system was the problem, not the fiscal"

ABA: "There govt's were buying up and not able to keep up"

Senate: "Are you aware of paper related to RNBS?

ABA: Only in broad terms

Senate: "then who is?"

ABA: "Lots of experts if you want to discuss the matters with experts"

Senate: "You recommend we shouldn't be taking any steps for culpability, is that correct. "

ABA: "Securitisation spread the risk and ASIC will still be in discussion, head will become head of IOSCO next year."

Senate: "People like noble prize winning analysts, points out in Spain ....."

ABA: "Picked me up on a small matter, and won't change the nature of the world"

Senate: "running a fiscal surplus, but in debt.  You should just butt out and not interrupt me.  The analysis brought out broadly, 'TOO big and interconnected to fail;"  Are you saying this is not relevant in Aust?"
ABA: "Collapse of big bank in Australia would be catastrophic."

Senate: "Should make banks more transparent.  Make the banks and credit card companies more competitive"

ABA: "Cheaper on the internet. banks reduced fees by $x(?) "

Senate: "Not cheap, what about large fees.  Are the banks engaging in predatory lending?  Practises that can be called into question."

ABA: "If there are concerns they should be looked at.  Not pure, but no systemic problems"

Senate: "4 issues for lending - too big to fail. Other issue is 'agency problem', centres that encourage risk taking.  Govt has to be aware of massive payments made to bank executives for more short term risks."

ABA: "range of issues being looked at by the govt."

Senate: "Improper insentives.  No individuals in the banks in Aust taken incentives?"
ABA: "Incentivised to sell products, not take risk"

Senate: "Sales selection goes on in the bank.  People who like risk taking move to banks. "

ABA: "Everytime we give someone a home loan or CC we are taking a risk.  Don't take risk taking as a problem, Entrepreneurs do. People getting it wrong is the problem, not risk taking per se.  Our members don't discuss risk taking much. "

Senate: "Evasive irrationality - systematically underestimating risk and investors not understanding their risk

ABA: "If so we would know about it by now. It wasn't by accident that our banks did well through the GFC."

Senate: "So we are ahead of the USA in regulation? that is a good thing"

ABA: "not necessirily, have to look at balance of risk and "

Senate: "Is the industry self-correcting?"

ABA: "Lets not lose that balance"

Senate: "it is an international banking system. YOu play in the international scene, borrow, lend internationally.  You are connected to that and you reap what you sow "

ABA: "just because banks failed in other jurisdictions doesn't mean we need more \

Senate: hoe many banks you represent?

ABA: "24"

Senate: "No doc Low doc loans still being issued by the banks?"

ABA: "not aware of them in the way you just described them. But I don;t think they are as we have responsible lending obligations"

Senate: "Is it mostly the smaller banks that sell off for securitisation?"

ABA: "importance source for banks to securitisation?"

Senate: "Tax payers have been dumped a bundle of bad luck"

ABA: " Bundle pile of loans and sell. The loans have to reach a certain standard.  not aware of any suggestion that loans"

Senate: "Do the banks have enough money to meet demands?

ABA: "No, but money is more expensive too.  Demand for peoples deposits is greater, loans are down.  Going forward not sure what is going to happen with demand for credit. Concerns about amount of money will be borrowed from overseas in the future."

Senate: "Family farms repossessed and asked ABA to keep family managed so,  What did you do when I asked you to pass that message onto your receivers?"

ABA: "I am sure the banks are aware of this concerns."

Senate: "Bankwest issues - prior to GFC and CBA expansion, BW was the only bank that would lend people money that they couldn't get elsewhere?"

ABA: "NOt sure, not involved in individual bank operations"

Senate: "Why charging individual business loans and charging 18%?"
ABA: "Banks reevaluate risk and adjust accordingly"

Senate: "better for banks to reposed because caan get tax benefits rather than help borrowers?"

ABA: "No, banks don't want to have to deal with properties"

Senate: "Basil III?"

ABA: "To manage losses  - BAsill III is not intended to de-risk banks.  Biggest  lesson out of GFC is good regulations.  GFC was a supervision failure.  One of the issues in europe I do know something about = dilemma to make their banks stronger and increase capital."


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  • doyla66
    doyla66 Wednesday, 08 August 2012

    "Not pure, but no systemic problems". > just absolute "systemic denial" of true facts & circumstances!

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