Risk on, or risk off
Have Australian banks become too risk averse? The push to make the country's banking system safer may have actually increased the risk in the broader financial system.
Are the big four banks doing enough to support the new Australian economy? It’s a question we’ve been asking ourselves since day one at Capital Brief and also something clearly on the mind of one of the country’s top bankers as he embarks on his valedictory tour before retirement.
Outgoing National Australia Bank chief executive Ross McEwan, who has never been one to mince his words, posed this blunt question at the AFR Banking Summit in Sydney on Tuesday: “Has the industry lost its risk appetite?”
The question is an important one for myriad reasons. Australia's economic transformation in coming decades will require significant capital. But, as we explored in our Capital Gains newsletter last week, that capital is not coming from banks — at least not to the extent many would expect.
It raises the broader question of whether banks — in the wake of the 2008 financial crisis, the Royal Commission and responsible lending regulation — have become too risk averse, and whether misguided regulation is actually making matters worse by simply pushing that risk into darker corners of finance.
