The banks are counting on their new hybrid securities being converted into equity at the behest of govt. New APRA rules allow for this in an emergency situation and banks prefer this approach to raising equity capital now as it would reduce current returns for shareholders and the bonus payments to key bank employees. The Murray review into the banks is considering the issue. There has also been talk of reducing the govt deposit guarantee from 25k to 100k. Bank bail-ins are the way of the future.
Page 26 of this week's AFR has another article by Christopher Joye about the need for banks to raise their tier 1 capital. He has previously written why the bank's hybrid securities are not really safe.
I think there are other matters that are making our banks less safe, especially their ventures in other countries. They will simply transfer the risk of those ventures onto the backs of Oz taxpayers, shareholders and bondholders. ANZ for example is lending money In Asia to people so they can speculate in our real estate. I think Westpac is also doing the same thing. I suppose Banksters are in love with the housing ponzi arrangement that is providing seemingly never ending bank profit growth. Who needs real economic growth when you can growth wealth via real estate appreciation? This is just another magic pudding with which we are blessed.
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