Right Peter, just trying to understand your position here.
Here is what happened in Ireland ( its quite simple)
1. Banks make dodgy loans to property developers and on the mortgage book. 2. Other banks who had previously being funding this start to notice that some of this money might not be repaid. 3. Liquidity dries up highlighting the fact that banks are insolvent effectively. 4. Irish government guarantees the entire book in the hope that this will remove the liquidity blockage. 5. It doesn't, bank debt becomes sovereign. Clusterfuck.
Sorry Veritas, I hadn't seen your question until now.
Quote:
Now what you seem to be saying is that the Australian banks could make similarly stupid decisions and come cap in hand to Government for a bailout.
But because, unlike Ireland, Australia has its own currency issuer, the RBA could just print money and give it to the banks to make whole their balance sheets.
And problems solved? In other words, the banks can fuck up as badly as they want and it doesn't matter because the RBA can backstop the lot.
That's why we need regulations for banks. We need banks to fund business as well as consumer loans such as buying homes and cars etc but we need limits on the risk that they can take.
My view is that Australian banks are quite prudent at the moment, but there are other views out there. Anybody not involved in the industry can only look at numbers and they can't drill down into every deal and determine the true worth of a loan. Let's be honest, a bank can lend to one person and their loan is secure because that person has a good job and he wants to pay back his loan, but someone else on exactly the same terms and conditions will present a different risk profile just because that person has a different set of values. How does anyone legislate for that. Do you dumb it down for the lowest common denominator and stifle economic growth or should there be flexibility built into the system to allow for different peoples capacity to repay and get things done?
A good bank should write some crap loans, but not too many.
Any expressed market opinion is my own and is not to be taken as financial advice
Australian banks are the most profitable alright. What do they sell? Debt! What do they need for record profits? A massive supply of people willing to take on trillions in household debt. How can that happen in a flagging economy? By propagating a lie that bricks and mortar are a win win investment and thereby sucking a generation of investors into buying up 50% of all the housing stock that comes up for sale.
Bubble bubble, toil and trouble. There will be a rush for the exits one day but the doors will be closed I am afraid.
Shadow was hopelessly wrong about the Gold Bull Market. What else is he wrong about?
That's where the problem is - as the financial planning inquiry demonstrated, the regulator in that case (ASIC) were almost complicit in the scandal, they were so ineffective.
The whistle blower himself even said that he wasn't interested in people resigning from CBA, he wanted to know why ASIC didn't do anything.
I reckon APRA have no idea what is going on in the banks, they are happy as long the banks don't f*ck it up
The banks are expected to post big annual profits again for 2014 despite investors dumping them ahead of the Reserve Bank's decision to keep the cash rate at 2.5 per cent on Tuesday afternoon.
There could be some long-term justifications for the sell-off. Goldman Sachs is forecasting that the recovery in lending growth, up 5.4 per cent compared to a year ago, will "stall" in the next 12 months.
Higher capital imposts are also more likely for the bigger banks in the years ahead.
Bank of Queensland will kick off the main round of bank annual reports on October 9, with analyst forecasts tipping a 20 per cent rise in cash profit for the year to about $300 million and a 13 per cent rise in earnings and dividends a share.
Australian Prudential Regulation Authority figures show BoQ's mortgage lending grew about 2 per cent between August last year and August this year. This is well behind system housing growth of 6.7 per cent. But BoQ will get a big boost from $440 million in business loans and deposits it bought with its acquisition of Investec Bank (Australia), completed in late July.
According to APRA figures, BoQ's business loan book has grown about 5.8 per cent in the year to August, compared to total business lending growth of 3.2 per cent.
This was also aided by new customer wins outside Queensland. The company is also expected to give an update on the search for a replacement for chief executive Stuart Grimshaw, who is expected to take up a new job at pay day lender EZCorp in Texas at the end of October.
But the focus will be on the slower growing big banks, three of which – ANZ Bank, NAB and Westpac – report in late October and early November, and whether they can continue their big shareholder returns of recent years.
Investors are worried the end is nigh for big profits and dividends at the big banks, with the Murray financial system inquiry expected to recommend the majors raise more capital against their mortgages.
There is also the spectre of moves by the Reserve Bank and APRA to dampen soaring house prices in Sydney and Melbourne with targeted measures against investors. However, Deutsche Bank analysts James Freeman and Andrew Triggs expect the impact of any such measures on the big banks to be "limited".
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