David Murray wants to follow the lead of US and UK regulators and formally separate banks’ trading activities from the more “traditional” ones associated with lending to households and business.
It is a controversial plan which Australia’s major banks are likely to resist. Unlike firms in the US, since the 1980s Australian banks have managed their trading and commercial arms as one.
But Financial System inquiry Chair David Murray has told the AFR that:
“Having Volcker (US Legislation), Vickers (UK law) and the European stuff in response to the crisis, you would have to consider whether it should apply in Australia,” he said.
Some people think they’re unnecessary and some people think they’re good. I always thought, originally going right back to Wallis [the 1997 banking inquiry], it was a good structure because it allowed clarity of regulation of the component parts of the group.
Banking Association boss Steven Munchenberg told the AFR that the separation of trading and commercial activities, known as ring fencing, couldn’t be ignored but said he questioned the “extent to which it is necessary and applicable to Australia”.
It appears David Murray is interested in having the debate regardless.
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