Norris reveals future worries
(20 December 2011 — Australia) The new bank capital and liquidity rules being introduced globally will increase the cost of money according to former Commonwealth Bank Australia (CBA) boss Ralph Norris.
He also said that governments had to share responsibility for increased borrowing costs, given they have been all too ready to back tough new banking rules.
Norris retired from CBA at the start of December, and revealed to the New Zealand Herald that the bank had some exposure to United States subprime lender Countrywide Financial as it started to enter a financial death spiral.
"Governments are very quick to agree to these things, and then very quickly try and distance themselves from the cause and effect," Norris told the Auckland-based New Zealand Herald.
"The effect is going to be a higher cost of money as a result, and that has to be absorbed somewhere in the system. That means, I think, that shareholders will probably see a reduction in returns and customers will see an increase in the cost of borrowing," he told the newspaper.
Norris also told the newspaper that Europe's problems had the potential to "completely derail the financial system". However, he said the solution to the problem will ultimately lay with France and Germany.
Countrywide's aggressive lending practices later came to symbolise the excesses of the housing boom.
'Banks internationally do provide standby lines, but you've got to be careful because people only really want to draw on them when they're in trouble, and we saw that with Countrywide Financial. The banks in Australia ended up having those lines called, and I have to say I was pretty nervous about whether we would get our money back," Norris said.
Norris, a New Zealander, plans to divide his time in his home country and Australia. The former CBA boss, he has agreed to join the board of New Zealand dairy giant Fonterra and Australia's Origin Energy.
Norris retired from CBA at the start of December, and revealed to the New Zealand Herald that the bank had some exposure to United States subprime lender Countrywide Financial as it started to enter a financial death spiral.
"Governments are very quick to agree to these things, and then very quickly try and distance themselves from the cause and effect," Norris told the Auckland-based New Zealand Herald.
"The effect is going to be a higher cost of money as a result, and that has to be absorbed somewhere in the system. That means, I think, that shareholders will probably see a reduction in returns and customers will see an increase in the cost of borrowing," he told the newspaper.
Norris also told the newspaper that Europe's problems had the potential to "completely derail the financial system". However, he said the solution to the problem will ultimately lay with France and Germany.
Countrywide's aggressive lending practices later came to symbolise the excesses of the housing boom.
'Banks internationally do provide standby lines, but you've got to be careful because people only really want to draw on them when they're in trouble, and we saw that with Countrywide Financial. The banks in Australia ended up having those lines called, and I have to say I was pretty nervous about whether we would get our money back," Norris said.
Norris, a New Zealander, plans to divide his time in his home country and Australia. The former CBA boss, he has agreed to join the board of New Zealand dairy giant Fonterra and Australia's Origin Energy.
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