Comments on Joshua Gans, et al “Complacency is not an option”, 8/07/2009, http://www.businessspectator.com.au/bs.nsf/Article/Complacency-is-not-an-option-pd20090707-TQ39Y?OpenDocument&src=is&is=Property&blog=Concrete Detail/
While there may be a case for a review, we should avoid over regulations and over reviews.
The two important examples used in this article are bank deposit guarantees and residential mortgage-backed securities (RMBS). If they are the most severe problems with the current system, then there may not be a need for a review.
Bank deposit guarantees can be done easily when government sees a need. The Australian experience of both with no guarantees and with guarantees has proven this point.
The case of residential mortgage-backed securities (RMBS) is not a matter of Australia’s doing and Australia has little influence on the rise and collapse of that market. As a result, any Australian review is unlikely to contribute much to that market.
The fact that Australian banking system have performed well during the recent financial and economic crisis seems also to suggest that the need for a comprehensive review is not strong.
The authors raised quite a number of questions that they say are unanswered. But do they mean they can only be answered by a comprehensive review? What those relevant bureaucratic agencies do? Can’t they answer them or, at least some of them?
Some of the questions may not be very relevant. For example, the second question, whether banks should be subject to a ‘systemic capital charge’ to account for the risks associated with the correlation between bank balance sheets, is hardly necessarily a relevant question for Australian banks, given their remarkable performance during the severe international financial crisis. Their performances mean that the Australian banking regulatory system and capital requirement were and are good. Then why now to have a review of the system that works well?
The international financial crisis should not necessarily be an excuse for a comprehensive review in Australia! We must recognise there are costs associated with any reviews. It is not free and costs nothing!
PS: there have been so many adverse responses including from government to the proposal of a government bank. They indicate how out of touch those economists are!