ANZ Banking Group CEO Mike Smith says banks from countries with "strong banking systems" should team up to fight against global banking reforms planned through what's known as Basel III, the Australian Financial Review (AFR) reports.
Citing comments Smith made from India where Australia's ANZ, which owns New Zealand's ANZ and National banks, UDC Finance and OnePath, was opening its first branch in Mumbai, the AFR says Smith believes the international banking reform process has been "hijacked" by ill-conceived policies seeking global conformity.
"India, China, Australia, Canada...countries that have strong banking systems need to ally themselves and push back on some of these proposals," The AFR reported Smith as saying.
"What is relevant for France, the USA and UK is not necessarily relevant to us."
An ANZ spokesman told interest.co.nz that a "push back" against Basel III as outlined by Smith was something the bank would like to see happen, but that it didn't have any specific plans to work with other banks to do so.
Basel III is a set of reform measures, developed by the Basel Committee on Banking Supervision, designed to strengthen the regulation, supervision and risk management of the banking sector in the wake of the global financial crisis. It aims to improve the banking sector's ability to absorb shocks arising from financial and economic stress, improve risk management and governance, and strengthen banks' transparency and disclosures.
The plans aim to boost the quality of banks’ capital, increase the level of capital they hold, promote the build up of capital buffers to mitigate procyclicality, improve capital framework risk coverage, introduce a leverage ratio as a supplementary measure to risk-based capital requirements and introduce global minimum liquidity standards.
The Australian Prudential Regulation Authority (APRA) recently said it plans to broadly adopt the minimum Basel III requirements for the definition and measurement of capital for authorised deposit-taking institutions. It proposes to amend current policies in several areas, taking a stricter approach in some but a less conservative approach in others. Here, the Reserve Bank plans to release a consultation paper on its proposed approach to Basel III within a couple of months and says it wants to ensure a "suitable fit" for New Zealand conditions and also wants to coordinate its policy with APRA's. See more here.
Meanwhile the AFR reported that Smith was "frustrated" at having a new round of Basel III regulations imposed by European and US banks whose "track record is not that good." The 2008 global credit crunch was caused by a lack of supervisions rather than a lack of regulation, Smith added. The AFR also said he believed that the latest reforms had been "hijacked" by politicians, instead of being overseen by banking specialists, and were being used as a "political football" for poorly considered policies.
(Update adds comments from ANZ spokesman).
6 Comments
Let us propose the failure was of supervision and not of regulation as Mike Smith maintains. Let us further suggested this outcome is a common long term result of regulation because of regulatory capture. That is to say the regulatory body, in the long run, becomes the mouth piece of the sector it represents - becoming captured by that sector.
If these assumptions were true is not Mike Smith proposing regulatory supervision be done by the local body rather than the international one?
One view of this might be he's just upset his own captured regulatory body won't be in control anymore.
I think he's got a good point, already it's ridiculous the amount of compliance work employees of NZ banks have to go through, just to keep the US happy.
I'm not against banks requiring more capital, that's good, but going through massive Basel regulations to achieve something quite simple is ridiculous. Basell has been around for a few years now, how do it do anything to stop this current crisis? nothing it failed miserably.I wouldn't be surprised at all if Basel III is completely hijacked by the US to serve it's own purposes, the US looks after the US and no one else.
I also like the concept of banks having more capital. But that said, I agree it's easy to be skeptical about the Basel process. Basel II (predecessor of Basel III) played a big role in enabling the loose farm lending that went on here.
The RBNZ's recent tightening of farm lending rules effectively turned the clock back to before Basel II came along. This increases the regulatory capital each of the four major banks - ANZ, ASB, BNZ and Westpac - must hold for farm loans.
As an RBNZ spokeswoman told me: "The banks’ initial positions were risk weights of around 50% - but taking into account changes in the banks’ own view of risk and our new requirements, we expect the system average risk weight (now) to be around 80-90%. This compares to the 100% requirement that applied to these banks prior to 2008 when the Basel II regime took effect."
So Basel II cut it from 100% to 50%.
More on that here - http://www.interest.co.nz/rural-news/53726/rbnzs-new-farm-lending-crite…
Let's hope Basel III doesn't throw up anything as foolish.
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