Bank re­forms wel­comed by smaller in­sti­tu­tions in Syd­ney

The Pak Banker - - Company& -

SYD­NEY: The small bank home lend­ing sec­tor en­dorsed yes­ter­day's re­forms, but re­gret­ted the de­ci­sion not to scrap the tiered bank­ing guar­an­tee sys­tem.

Mem­bers Eq­uity Bank chief ex­ec­u­tive Jamie McPhee said the re­forms had struck a "good bal­ance" across the na­tional fi­nan­cial sys­tem.

"On bal­ance, I think it's a rea­son­able set of ini­tia­tives," he said af­ter the govern­ment un­veiled its keenly awaited Com­pet­i­tive and Sus­tain­able Bank­ing re­forms pack­age.

The re­forms ranged from abol­ish­ing exit fees, em­pow­er­ing the Aus­tralian Com­pe­ti­tion & Con­sumer Com­mis­sion to pros­e­cute anti-com­pet­i­tive price sig­nalling, build­ing a new pil­lar in the bank­ing sys­tem by sup­port­ing the mu­tual sec­tor, and al­low­ing banks, credit unions and build­ing so­ci­eties to is­sue cov­ered bonds.

Crit­i­cally for ME Bank, Mr McPhee said, was the pro­posal to in­vest a fur­ther $4 bil­lion to buy res­i­den­tial mort­gage-backed se­cu­ri­ties to sup­port smaller len­ders.

"If you said to me what's the one thing that's very crit­i­cal to ME Bank, it's that one," he said. While the mar­ket had not yet re­turned to nor­mal­ity, he said, "to have the AOFM (Aus­tralian Of­fice of Fi­nan­cial Man­age­ment) con­tinue to sup­port that mar­ket for us was quite crit­i­cal".

The missing piece in the re­forms for Mr McPhee was the govern­ment's de­ci­sion not to scrap the tiered pric­ing to ac­cess its whole­sale bank fund­ing guar­an­tee, which is based on a bank's rat­ing. The govern­ment in­tro­duced the mea­sure in 2008, dur­ing the global fi­nan­cial cri­sis.

"I felt that was never ap­pro­pri­ate, re­ly­ing on rat­ings to de­ter­mine the pric­ing with the govern­ment," he said.

"So one thing I would have liked to see the govern­ment do is to put ev­ery­one back on the same level of the fee that they're pay­ing for the govern­ment guar­an­tee."

Over­all, Mr McPhee said the pro­posed bank­ing re­forms were a "good an­nounce­ment".

"If you look at the de­vel­op­ing of cov­ered bonds, that's ob­vi­ously some­thing that's not go­ing to help the smaller banks but it is go­ing to help the ma­jor banks ac­cess fund­ing," he said.

"Any­thing that's go­ing to as­sist the bank­ing sys­tem as whole . . . such as ac­cess­ing fund­ing is a healthy thing." Be­cause the smaller banks did not share the same high rat­ing as the ma­jor banks, it was harder for smaller len­ders to is­sue cov­ered bonds cost-ef­fec­tively, he said. "For us, that is the ad­van­tage of mort­gage-backed se­cu­ri­ties, rather than cov­ered bonds." -PB News

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