Day 464: 'Scared of making a mistake'
Counting the days since the banking royal commission was established.
Good afternoon, and welcome to day 464.
Today in summary: Westpac business banking head David Lindberg says Australia is drowning in business regulation, and over-zealous bankers responding to it are partly behind the credit squeeze; AMP chairman David Murray warns of a risk to the banking system as superannuation funds move their money to infrastructure; and APRA holds the threat of tightened capital requirements over those institutions funding peer-to-peer lenders.
-- Charis
Current banker panic level: 🤥🤯 🙄
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Westpac’s incoming consumer banking head David Lindberg has pointed to over-zealous bankers who are “scared of making a mistake” as partly behind the credit squeeze he says has brought business investment to a halt. Lindberg told the AFR Banking & Wealth Summit:
“If a small business owner forgets to include their Foxtel bill or credit card for their daughter – the banker is scared of the consequences. Banks are using belts and suspenders to protect themselves. We have more manual checks, more onerous forms, and more reporting.”
“Australia has over half a million pages of business regulation. If you could find it all in one place, which you can’t, it would take over six years to read,”
AMP chairman David Murray has called for improved disclosure by superannuation funds of what they are investing in, arguing as more invest in infrastructure a slowdown or withdrawal of funds in the system could leave the sector exposed. Murray told the AFR Banking & Wealth Summit:
“My concern is, to the extent that super funds invest in unlisted, illiquid assets or that they can become forced sellers of the same classes of assets that banks hold for security over loan. This then sets off a spiral in the banking system."
But AustralianSuper executive Paul Schroder called the comments “affronting”, given managing assets to liabilities was a fundamental duty of super funds.
APRA has written to the banks warning them of the credit risks linked to funding peer-to-peer lenders. The prudential regulator said it had seen a lack of a well thought through rationale for some institutions getting into business with third-party lenders, and an inconsistent approach in how they were classifying exposure to P2P loans in APRA returns.
“APRA wishes to make it clear that we regard P2P lending as having a high risk profile and will actively adjust capital requirements if considered necessary.”
Today’s burn prize: Macquarie University’s Elizabeth Sheedy
🔥🔥🔥
“It does concern me that we’ve got a situation where for many years shareholders have made such good money out of the exploitation of customers that it’s very hard for shareholders to turn around and say, ‘oh no, we’ve had enough of that, we’re going to turn off that tap.”
Sheedy was part of a panel discussion in which former APRA supervisor Fahmi Hosain called for an end to the two-strikes rule driving remuneration changes at banks.
The Commentariat
ASIC is no longer interested in providing guidance to banks looking for solutions to past misdeeds, leading to a paralysis of decision making” inside some institutions, writes the AFR’s Chanticleer.
“Chanticleer understands from several different institutions that ASIC’s response to requests for guidance is along the following lines: “We will not tell you what to do, and we reserve the right to sue you if you get it wrong.
“This attitude is completely understandable given the pasting ASIC copped from the Hayne inquiry. But it may not necessarily be in the interests of consumers.”