Comments on Rodney Maddock "Australian banks are strong; should we pay for them to be stronger?" 16/07/2015
I think it is important to get the balance right, as opposed to a moving goal post. It requires both the banks and the regulators to be flexible and responsive enough to deal with changes in the banking and finance industry, both in Australia and globally.It is not advisable for a capital reserve ratio that is too low to manage risks.
Equally, it is not advisable for the banks to hold capitals that are unnecessarily too high to be efficient.
Holding too little or too much capital is not good for the banks, the consumers, the economy and the regulators.There is no need to be too mechanical.
Further, the ratio may or should change with changes in real circumstances.
Showing posts with label banking regulators. Show all posts
Showing posts with label banking regulators. Show all posts
2010-04-01
Stable and diligent financial industries
Comments on Karen Maley “Who should pay for the GFC?” 1/04/2010, http://www.businessspectator.com.au/bs.nsf/Article/Who-should-pay-for-the-GFC-pd20100401-442RF?OpenDocument&src=sph
It is nonsensical to suggest that some banks and financial institutions have been bailed out in the GFC, every bank and financial institution should be punished.
Any financial reforms have to resolve the moral hazard issue of any reckless financial institutions.
The ultimate punishment is to have all shareholders and creditors value wiped out and possible criminal prosecutions for its key personnel, in case it cannot repay the government's costs of bailing it out.
Only in that way, every institution will have no illusion that they would be bailed out freely, and the financial system will also have security and order.
It is nonsensical to suggest that some banks and financial institutions have been bailed out in the GFC, every bank and financial institution should be punished.
Any financial reforms have to resolve the moral hazard issue of any reckless financial institutions.
The ultimate punishment is to have all shareholders and creditors value wiped out and possible criminal prosecutions for its key personnel, in case it cannot repay the government's costs of bailing it out.
Only in that way, every institution will have no illusion that they would be bailed out freely, and the financial system will also have security and order.
2009-09-25
G20 - helpful or unhelpful?
Comments on Uri Dadush “Four challenges in Pittsburgh for the G20”, 24/09/2009 http://www.eastasiaforum.org/2009/09/24/four-challenges-in-pittsburgh-for-the-g20/
Among the three important examples which go beyond the current crisis, the third one is likely to be the most difficult one. It is not a significant issue for quite a number of countries in the group that means there may not be enough incentive to have that on the agenda.
In a post crisis environment, it may be easier to achieve the second and the first ones.
There is enough momentum for the first one out of the UN summit meeting this week.
In terms of withdrawal of stimulus, the group is now more unhelpful than being helpful, because it should send a clear signal that while in many countries it is still too early to withdraw measures, the condition in some countries are such that their government should decide when and how to withdraw from stimulus, otherwise there will be a serious chance that they may do it too late that will accelerate inflation.
The group already has an adverse effect on some countries, say Australia. The Australian government is using the group to play domestic politics and delay withdrawal.
In terms of how to prevent future similar crisis, it is important not to over regulate the banking and finance industry to achieve financing efficiency and lower costs of capital. There may be some minimum international regulations / guidelines, and leave the rest to each country to make sure their banks are safe and efficient.
The worst thing is to have a group of unaccountable international bureaucrats to impose a set of excessive regulations in the wake of the crisis in the name of preventing another crisis that will significantly increase the costs of finance everywhere.
Banks in Australia have done through the crisis with little problems. In such a case, is there a need to tighten the regulations? The answer is definitely no. But the danger is that the Rudd government will do it nevertheless to fight the so called “neo-liberalism”, or “market fundamentalism”.
That will be a tragedy for Australia with higher interest rates than necessary.
Among the three important examples which go beyond the current crisis, the third one is likely to be the most difficult one. It is not a significant issue for quite a number of countries in the group that means there may not be enough incentive to have that on the agenda.
In a post crisis environment, it may be easier to achieve the second and the first ones.
There is enough momentum for the first one out of the UN summit meeting this week.
In terms of withdrawal of stimulus, the group is now more unhelpful than being helpful, because it should send a clear signal that while in many countries it is still too early to withdraw measures, the condition in some countries are such that their government should decide when and how to withdraw from stimulus, otherwise there will be a serious chance that they may do it too late that will accelerate inflation.
The group already has an adverse effect on some countries, say Australia. The Australian government is using the group to play domestic politics and delay withdrawal.
In terms of how to prevent future similar crisis, it is important not to over regulate the banking and finance industry to achieve financing efficiency and lower costs of capital. There may be some minimum international regulations / guidelines, and leave the rest to each country to make sure their banks are safe and efficient.
The worst thing is to have a group of unaccountable international bureaucrats to impose a set of excessive regulations in the wake of the crisis in the name of preventing another crisis that will significantly increase the costs of finance everywhere.
Banks in Australia have done through the crisis with little problems. In such a case, is there a need to tighten the regulations? The answer is definitely no. But the danger is that the Rudd government will do it nevertheless to fight the so called “neo-liberalism”, or “market fundamentalism”.
That will be a tragedy for Australia with higher interest rates than necessary.
2009-09-17
Banking regulators need to better their jobs
Comments on Alan Wood “Interest rates on their way up”, 17/09/2009, http://blogs.theaustralian.news.com.au/currentaccount/index.php/theaustralian/comments/interest_rates_on_their_way_up/
While it is understandable that "from 1999 to 2007, the official rate and variable mortgage rates moved in lockstep", it is also puzzling that why the low international costs of funding were not much reflected in lower costs of borrowing for consumers.
We have experienced incomplete pass through of the RBA's cuts to official interest rates in the past year or so. But we did not see the reverse of that earlier in the past decade.
The relevant regulators should closely monitor what the banks in Australia are doing in terms of margins, taking into account of costs of funding in international capital market.
It does not appear that they have done a good job. They need to get on top of their jobs.
While it is understandable that "from 1999 to 2007, the official rate and variable mortgage rates moved in lockstep", it is also puzzling that why the low international costs of funding were not much reflected in lower costs of borrowing for consumers.
We have experienced incomplete pass through of the RBA's cuts to official interest rates in the past year or so. But we did not see the reverse of that earlier in the past decade.
The relevant regulators should closely monitor what the banks in Australia are doing in terms of margins, taking into account of costs of funding in international capital market.
It does not appear that they have done a good job. They need to get on top of their jobs.
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