May 25, 2016
By Clancey Yeates
Australia's major banks (click here) receive an implicit subsidy worth between $1.9 billion and $3.7 billion from the market's assumption that taxpayers would come to the rescue in a crisis, the Reserve Bank of Australia has estimated.
The funding advantage that the big four banks gain over smaller rivals from being "too big to fail" peaked in the global financial crisis, but was still present when an internal report was prepared in 2015, documents published under Freedom of Information laws showed on Wednesday.
"This funding advantage may distort competition, allowing large institutions to grow larger and perhaps pressuring smaller banks to take risk."
Advise to small, local banks; "Don't do it!" Such issues need to be addressed in the smaller banks' charters. They should never be permitted to leverage the value of the bank.
The finding from the RBA comes as regulators around the world look to limit the risk that taxpayers will be called on bail out banks, by forcing lenders to issue more "bail-in" bonds that would force creditors to wear bigger losses in a crisis....
So, in the USA there exists an amendment to the USA Budget that allows risky investments in the financial sector, while the rest of the world attempts to protect from it.
This is ridiculous. The corrupt members of US House has to be replaced, otherwise, the USA will be losing allies one by one.
By Clancey Yeates
Australia's major banks (click here) receive an implicit subsidy worth between $1.9 billion and $3.7 billion from the market's assumption that taxpayers would come to the rescue in a crisis, the Reserve Bank of Australia has estimated.
The funding advantage that the big four banks gain over smaller rivals from being "too big to fail" peaked in the global financial crisis, but was still present when an internal report was prepared in 2015, documents published under Freedom of Information laws showed on Wednesday.
"This funding advantage may distort competition, allowing large institutions to grow larger and perhaps pressuring smaller banks to take risk."
Advise to small, local banks; "Don't do it!" Such issues need to be addressed in the smaller banks' charters. They should never be permitted to leverage the value of the bank.
The finding from the RBA comes as regulators around the world look to limit the risk that taxpayers will be called on bail out banks, by forcing lenders to issue more "bail-in" bonds that would force creditors to wear bigger losses in a crisis....
So, in the USA there exists an amendment to the USA Budget that allows risky investments in the financial sector, while the rest of the world attempts to protect from it.
This is ridiculous. The corrupt members of US House has to be replaced, otherwise, the USA will be losing allies one by one.
