It seems it’s not just David Murray and his colleagues on the Financial Services Inquiry who are worried about the level of bank capital and the impact on Australia’s financial stability.
The AFR reported this morning that “Australian Foundation Investment Company managing director Ross Barker said he supported any new regulations that made the banking system more resilient”.
Barker said that: “If the argument was that this would make [the banks] more resilient but perhaps reduce a bit of their returns, then that’s worth supporting. What you want for them is to do well over the medium to long term and not have booms and busts.”
This might put Barker at odds with many of his fellow investors but it could be a result of ASIC’s stated and evident long-term approach to investing its more than $5 billion portfolio.
Last week UBS analysts said that the banks may need to raise an additional $23 billion in capital which, all other things equal, would be a handbrake on return on equity.
It’s a contentious issue but an incredibly important one for Australia’s economic resilience.
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