The famous 4 pillars policy of Australian banking regulation is a bit of two edged sword. The problem is that it is anti-competitive to only have 4, but anything smaller either was going to get swallowed up or has already been swallowed up. On the other hand, it was anti-competitive enough that they didn't feel a rush to place bets on sub-prime loans... allegedly. Either way the Australian consumer gets to feel smug and mugged at the same time. It's fascinating to see. :)
With that said, I want to share with you this link from Pleiades:
Since it became clear to our Government that the local economy could not remain immune from the global downturn, the public largesse handed out to the self proclaimed 'healthy' banks has been astounding. We've had deposits guaranteed, all overseas borrowings guaranteed (using the Federal Government's credit rating), car dealer finance has been propped up and former CEO aspirant at the NAB, Ahmed Fahour, is now in charge of the aptly named 'Ruddbank' which has been designed to support the commercial property sector (to which the Big Four Banks have over $100bn of loan exposure).
The question which now comes to mind is this - as is the case with A.I.G., do Australian banking executives need to be paid large salaries and bonuses when the ever grateful taxpayer is the one doing all the heavy lifting? As a free marketeer I'm happy for any bank brave enough to wean itself off the public teat to pay its senior people whatever it likes. But while my (and your) money is being used to support their businesses, I say it's time for banking bonuses to be stopped.
Like I said, it's pretty interesting to see. It's a good question indeed to ask, how com our banks get propped up and their top execs get to keep their top pay?
Here's another link from Pleiades:
Australia is undoubtedly over-banked. The banking regulator, APRA, lists over 190 ADIs (Authorized Deposit-taking Institutions) for which it is responsible, including foreign and domestic banks, credit unions, building societies and various specialists. That works out at one whole bank for every 120,000 Australians (men, women and children). For comparison, the largest bank in the USA, Bank of America, reports almost three times as many customers as the entire population of Australia. Who picks up the bills for all of this duplication and waste in this country - the Australian consumer!
The big banks have long claimed that the Four Pillars policy restricts them from growing, presumably overseas since the local market is saturated. The creation of an OzzieBank would free up the banks to go their own way if they wanted to, although they might find the going a bit tough without an implied government guarantee and the resulting AA credit rating.
But the needs of Australians for basic banking services are changing anyway. Young Internet savvy customers are demanding services delivered instantly and electronically on their iPhones. Ageing baby boomers have less need of traditional banking services but increased demand for superannuation advice - which is why banks are piling into that particular niche, with little evidence that they will do it any better than the incumbents.
I'm actually in the fortunate position to be able to say that my four-pillars bank is quit satisfactory in its performance. But I can imagine it could easily change with a slight tilt of the global financial axis.I guess I should be happy my deposits got guaranteed but at the same time I'm thinking, is this even *right*?
As I look through the shares of the big four, I note that while their bottom line looks fine, I'm still inclined to think their shares are priced way too high.
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