Wednesday, May 10, 2017

This is how a country begins to break up the big banks.

By Peter Wells

...This levy (click here) would apply to about A$2.6tn in liabilities including senior bonds, covered bonds, subordinated bonds and all retail deposits above A$250,000 per individual, and raise A$6.2bn for the government over four years, Mr Morrison said.

Shares in Australia’s four big banks — which reported combined profits of A$30bn in the 2015-16 financial year — fell on Wednesday, extending a decline that the previous day wiped A$14bn from their combined market cap.

Analysts said lenders would probably pass the tax on to their customers by increasing mortgage rates. But Treasury officials were gambling that it would be difficult for banks to do so, because if the big banks cut deposit rates or lifted interest rates, smaller banks not subject to the levy would fill the gap with more competitive offerings.

Morgan Stanley analysts estimated that the “proposed bank levy would reduce major bank earnings by about 4.5 per cent before any repricing offsets” and would strip about 1.6 percentage points off the Australian stock market’s earnings per share....

The levy, every year, will absorb the high end amounts of greed obtained by the banks. It will return the levy to reduce the national debt and enforce the sovereign authority of Australia.

It is not going to break the backs of any bank; it tempers their profit margin into a realism that prevents over reach, mergers and irresponsible investing; ie: The London Whale. If the money is not floating in the banking system it cannot be spent.

In recent years, we have witnessed merger after merger to bring asset strength into the financial markets in "debt to asset" ratio. It is ridiculous to think this form of financial leadership is good for any country OR ANY COMPANY. Countries cannot escalate their value to create an authority greater than the sovereign. A country must resolve it's debt and maintain control of it's borders and any greed that goes on within those borders that is adverse to the citizens.

This decision by Australia did not happen overnight. It occurred in the years since 2008 and provides for a stronger Australia and a better and more comfortable home for it's citizens.