Waller, Mike: The real problem with our banks – “it’s leverage, stupid”

Mike Waller

The real problem with our banks – “it’s leverage, stupid”‘, Pearls and Irritations, 10 April 2018

Former Australian Public Service senior official and BHP economist writes about banking issues.

We are more than a decade on from the Global Financial Crisis (GFC) that no risk modelling or prudential supervision forecast and that forced the Government into guaranteeing billions of dollars of bank debt. Since then Australia has failed to address a key underlying driver of that crisis (excess leverage – too much debt, too little equity/cash), let alone the more fundamental questions [of the role of financial systems].

Instead, the myriad inquiries into Australia’s banking system focus on second-order symptoms – customer deception, interest rate manipulation, inflated executive salaries; and, the same superficial causes cited post the GFC – conflicts of interest, incompetent governance and risk analysis, executive greed and inadequate regulation.

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