Bank levy called by Greens MP
(8 June 2011 – Australia) In a speech to the Australian Bankers Association (ABA) this week Greens MP Adam Bandt called for a "too big to fail" levy to be imposed on the big four banks to increase competition in the industry.
Implicit government support of the big banks through discounted access to the wholesale funding guarantee scheme, combined with the ''four pillars'' policy, has reinforced the dominance of the big four lenders, Mr Bandt said.
He also pointed to the planned introduction of covered bonds as entrenching the dominance of the large banks, as it represents only a marginal funding benefit for smaller banks.
Covered bonds, which allow bank bonds to be secured by mortgages, could potentially shift the risk to the public purse, he said.
''It is time to ask whether we in fact have an implicit too-big-to-fail policy in Australia,''
''And if that is the case, isn't it time the financial beneficiaries of this policy be asked to provide something in return?''
Treasury has been resisting efforts by some global policymakers to strengthen too-big-to-fail proposals in a way that would impact on Australia's big four banks.
There is a push within the G20 for all large domestic banks to hold even higher levels of capital to protect the financial systems of their home markets. This would result in Australia's big banks facing a modified version of the too-big-to-fail proposals, despite none of them being considered a threat to the global system.
He also pointed to the planned introduction of covered bonds as entrenching the dominance of the large banks, as it represents only a marginal funding benefit for smaller banks.
Covered bonds, which allow bank bonds to be secured by mortgages, could potentially shift the risk to the public purse, he said.
''It is time to ask whether we in fact have an implicit too-big-to-fail policy in Australia,''
''And if that is the case, isn't it time the financial beneficiaries of this policy be asked to provide something in return?''
Treasury has been resisting efforts by some global policymakers to strengthen too-big-to-fail proposals in a way that would impact on Australia's big four banks.
There is a push within the G20 for all large domestic banks to hold even higher levels of capital to protect the financial systems of their home markets. This would result in Australia's big banks facing a modified version of the too-big-to-fail proposals, despite none of them being considered a threat to the global system.
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