Banking boys club inquiry
Published in the Daily Telegraph, January 2015 by Dale Gillham
The banking industry is a big boys club, and the recent inquiry into it was by one of their own, in ex-CEO of the Commonwealth Bank, David Murray.
Therefore, this inquiry may not have been taxpayer money well spent.
I say this for two reasons:
- Why would Murray want to tie the hands of his old banking mates?
- Would anyone expect an ex-bank chief to lay down the law to the banking industry?
Financial inquiries cost taxpayers a lot of money, without any guarantee recommendations will be implemented. So is this latest inquiry another expensive lame duck report or money well spent?
Although I applaud the government
for taking the initiative,
we are now seven years
down the track from the GFC,
so maybe this inquiry should
have occurred long ago.
I believe most people would
agree with me when I say Mr
Murray was never going to come down hard on the banks.
Mr Murray’s role in this inquiry was to create confidence in the banking system, so no one would expect him to make big waves, and after reading the report’s major points this hasn’t occurred.
So, was the money well spent?
All in all, 44 recommendations
were made, to which the
federal government must
respond, but before deciding
on what recommendations to
implement they must take
feedback from the Australian
One recommendation that would directly impact on the banks is to raise the amount of capital that banks must hold as backing for loans they write, from around 8.3 per cent up to 11.6 per cent.
Whenever changes are proposed
for our banks, headlines
about the impact of restrictions
appear, creating uncertainty
and volatility in our
sharemarket. When bank
shares fall because of an inquiry,
as a shareholder, are we
concerned about what’s good for our banking industry, or do we become focused on our own back pockets?
Australians want to put their hard-earned cash in the bank and know it’s safe. Therefore, we cannot allow banks to decide how much capital they will hold, or give them free reign on how to do business.
Getting the balance right is a challenge for policy makers. History shows restrictions are softened before big collapses.
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