The rules of banking continue to change
Banking and the rules set by regulators to protect your money are ever changing. In 1974 the Basel Committee on Banking Supervision was formed in Switzerland by the central bank governors of the G10 countries to improve the supervisory guidelines for both wholesale and retail banks worldwide.
Since that time three sets of global standards have been released, and in particular standards regarding the amount of capital that all banks must maintain. The implementation of the third set of these standards commenced in 2013, requiring all banks and financial institutions to hold more capital and more liquidity. In late 2015 our Australian regulator APRA (Australian Prudential Regulation Authority) used their national discretion to further increase the amount of capital our major Australian banks hold, and for all financial institutions they curbed the amount that could be lent to investors to buy investment properties.
While it has taken 42 years for three sets of standards to be developed and implemented, a fourth global ‘capital’ standard is currently being drafted. Basel 4 as it is known, when implemented by APRA, is anticipated to further ‘level the playing field’ between the major banks and the smaller banks which will improve not only the strength of the whole banking sector but also improve competition. It is likely that under the new standards the major banks will need to raise further capital, but as Victoria Teachers Mutual Bank and other mutual banks already hold nearly twice as much capital as the major banks, the impact on us should be minimal.
This together with the positive recommendations that the Government endorsed from the Financial Systems Inquiry in late 2015 should provide us with greater opportunity to take advantage of our competiveness, as the more competitive we become, the more benefit we can provide to our Members.
As a Director I am excited by the potential opportunities that these changes bring and working towards maximising these for the benefit of our Members.