Liquidity makes stability tough
(28 October 2009 – Australia) Bendigo and Adelaide Bank has warned that toughening liquidity rules will make it impossible for banks to support each other like they did during the financial crisis.
Last month, Australian Prudential Regulation Authority (APRA) released a discussion paper proposing a significant enhancement to the current minimum bank liquidity levels that allow banks to survive a crisis for just five days.
The enhancement is being designed to help ensure the banking industry can meet its obligations in the next crisis.
A revised prudential standard on liquidity will look to ensure banks can survive a crisis for 30 days instead of the current minimum of five days. It is expected to be introduced in the first half of next year.
Bendigo and Adelaide Bank chairman, Robert Johanson, however, was heavily against the proposal.
The proposed new rules, Mr Johanson said, will, in their current form, reduce profitability, increase borrower costs and make impossible support of banks by other banks.
This mutual support was a significant help in dealing with the events of a year ago here, when most Australian banks did co-operatively work to support the system and each other, Mr Johanson added.
The enhancement is being designed to help ensure the banking industry can meet its obligations in the next crisis.
A revised prudential standard on liquidity will look to ensure banks can survive a crisis for 30 days instead of the current minimum of five days. It is expected to be introduced in the first half of next year.
Bendigo and Adelaide Bank chairman, Robert Johanson, however, was heavily against the proposal.
The proposed new rules, Mr Johanson said, will, in their current form, reduce profitability, increase borrower costs and make impossible support of banks by other banks.
This mutual support was a significant help in dealing with the events of a year ago here, when most Australian banks did co-operatively work to support the system and each other, Mr Johanson added.
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